As HarleyDavidson looks abroad, trade tariffs hit home

Harley-Davidson expects new tariffs to increase the company’s annual costs by as much as $100 million as long as the trade dispute between the U.S. and other countries goes on.

Executives with the Milwaukee company spoke with investors Tuesday for the first time since announcing last month that production of motorcycles sold in Europe would move overseas in order to avoid retaliatory tariffs the EU is imposing on American exports.

That announcement unleashed a series of critical tweets from President Donald Trump, and there was no sign that the administration’s stance on trade would change, despite calls from within the GOP to do so.

“Tariffs are the greatest!” the president tweeted Tuesday.

With sales stagnant at home, Harley-Davidson has looked increasingly overseas for buyers of its iconic motorcycles. The company did not discuss Trumps’ criticism, but CEO Matt Levatich stood by its decision to move some production overseas because of the tariffs.

“It put further pressure on our business and we made the best decision based on the circumstances,” he said.

Harley-Davidson said it’s working with the Trump administration and other governments to try to get the tariffs removed.

In the short term, the cumulative impact from the tariffs will increase HarleyDavidson’s costs as much as $55 million this year, the company said. Costs from raw materials subject to tariffs, like steel and aluminum, account for $15 million to $20 million, and the EU tariffs add another $30 million to $35 million, according to Harley-Davidson.

On average, the EU tariffs will increase the cost of motorcycles sold in Europe by $2,200, but the company is absorbing all of those costs, rather than passing price hikes on to customers.

Harley was one of the high-profile American companies singled out by the Europe for tariffs, along with bourbon and Levi’s jeans. Farmers, too, are getting hit as agricultural exports are targeted overseas.

The tariffs rolled out by Europe took effect right at the end of the most recent quarter, on July 1, so the ramifications have yet to fully land at Harley-Davidson.

The company on Tuesday, citing the tariffs, lowered its expectations for operating margins this year from 9.5 percent to 10.5 percent, to 9 percent to 10 percent.

Getty Images Harley-Davidson motorcycles are parked on the South Lawn of the White House in Washington, D.C.