For months, economists have warned of the potential consequences of engaging in a global trade war. And yet, President Trump has pressed on with his tariffs in an attempt to compel consumers to “buy American.” Imposing a 25 percent tariff on imported steel, and a 10 percent tariff on imported aluminum, this new trade policy has dealt a blow to the global economy.
Originally, Trump had said that the European Union would be excluded from these trade restrictions, but this has since changed. And unfortunately, imposing tariffs on materials purchased from the EU has now resulted in one beloved American company moving its manufacturing abroad.
On June 25th, the motorcycle brand Harley-Davidson filed with the Securities and Exchange Commission, disclosing its intent to move a portion of its manufacturing facilities overseas. Currently, the giant of the motorcycle world manufactures its products in the Rust Belt. However, with the escalation of Trump’s trade wars, the company is moving some of its facilities to Europe to save money and avoid losing its foreign consumer base.
Unfortunately, other countries do not take kindly to trade barriers being arbitrarily placed on imported goods. And in many instances, when these types of policies are instituted, foreign countries respond by creating their own tariffs on American goods in retaliation. This is exactly what is happening now. The European Union is moving forward with new tariffs targeted at American products including denim, orange juice, bourbon, motorcycles, peanut butter, motorboats, and cigarettes.
For companies like Harley-Davidson, who do a lot of business in Europe, this presents a huge problem. In fact, the new tariffs are expected to increase the cost of a motorcycle exported to the EU by $2,200 per bike. Additionally, the new policy is estimated to cost Harley-Davidson upwards of a $100 million each year. This is a huge burden to place on the company.
Unwilling to participate in a war that they did not start, Harley-Davidson made the decision to move some of its manufacturing abroad so as not to alienate its European market. The company’s filing said that passing of this costly burden to the European consumer would result in “an immediate and lasting detrimental impact.” But since it takes almost a year to get a new manufacturing plant setup, the company is still expected to lose anywhere from $30 to $45 million in the process.
While the domestic consequences of this decision are still unknown, it is not out of the realm of possibility to assume that by moving its manufacturing abroad, the company will have to lay off American workers. But what else is the company to do?
Trump has attacked the company for this decision, tweeting:
“Harley-Davidson should stay 100% in America, with the people that got you your success. I’ve done so much for you, and then this. Other companies are coming back where they belong! We won’t forget, and neither will your customers or your now very HAPPY competitors!”
But Harley-Davidson’s decision is a direct result of Trump’s careless trade policies. These tariffs make it more expensive for American companies to get the supplies needed to make their products. This is then coupled with the tariffs placed on American goods abroad, making this a lose-lose situation for Harley-Davidson. They are spending more while also suffering losses since their products are now too expensive for foreign buyers. Trump has tied the hands of the company, along with many others. And as far as consequences go, we are just getting started.
It is very likely that in the coming months, more companies will be forced to make the decision to move manufacturing abroad. And the only entity Trump can blame is himself. Individuals and the companies they represent should be free to trade with whomever they choose.
Also published on Medium.