Harley released what it said was some good news Monday, posting better-than-expected first-quarter earnings. Except Harley then also said that its entire business model in Europe could be completely fucked.
That is because of tariffs that are a legacy of the Trump administration, which needlessly started a trade war with Europe and got Harley caught in the crossfire in the form of higher tariffs on American motorcycles. Harley initially thought it had a workaround, by sending motorcycles it built in Thailand to Europe instead.
But Harley said Monday that a new European Union ruling meant that that workaround apparently won’t work anymore. Emphasis at first Harley’s, and then mine:
Harley-Davidson will be lodging an immediate legal challenge to this decision.
Since 2019, the company has operated with BOI regulatory credentials, allowing it to supply its E.U. markets with certain motorcycles produced at its international manufacturing facilities at tariff rates of 6%.
The E.U.’s new ruling will apply to the entire Harley-Davidson product portfolio and will effectively prohibit the company from functioning competitively in Europe. From June 2021, all Harley-Davidson products, regardless of origin, will be subject to a 56% import tariff within the E.U.
European OEMs, including motorcycle manufacturers, will continue operations with significantly lower import tariffs to the U.S. ranging from 1.2% for up to 800cc products to 2.4% for over 800cc products, and with automobiles at 2.5%.
The Wall Street Journal, meanwhile, reports that Harley became aware of the ruling late Friday, which must have been an unpleasant surprise.
“This is an unprecedented situation and underscores the very real harm of an escalating trade war to our stakeholders on both sides of the Atlantic,” Jochen Zeitz, Harley-Davidson’s chairman, said in a statement. “The potential impact of this decision on our manufacturing, operations and overall ability to compete in Europe is significant. Imposing an import tariff on all Harley-Davidson motorcycles goes against all notions of free trade and, if implemented, these increased tariffs will pose a targeted competitive disadvantage for our products, against those of our European competitors.”
One of the first things Harley did after Trump was inaugurated was visit the White House, but that relationship quickly became very, very complicated, and, today, I’m guessing that Harley has more than a few regrets, because now Trump’s decisions have now put Harley on the brink of disaster.
Europe is supposed to be one of Harley’s key markets, after its CEO said last year that it would leave some markets and focus more on the U.S., Europe and Asia Pacific. And yet this is also the kind of thing that Harley presumably pays lobbyists to help fix, and I wouldn’t be surprised if ultimately Harley is able to work out some kind of agreement to stay competitive in Europe. Because surely Europe would prefer to have Harley there in some capacity rather than not at all.