Tariff Retaliations And The Motorcyle Industry How we could be exporting jobs and losing profits.

Tariff Retaliations And The Motorcyle Industry  How we could be exporting jobs and losing profits.

I’m going to do everything I can to leave out the headline selling presidential name that gets used a little to often these days. However, I will be very clear that no matter what side of the political spectrum you support your iron-made motorcycle will likely get caught in the middle.

The Problem

    Actually I could write a 9-page article about all the problems related with tariff increases and sh!t that is going to get stirred up if / when they all actually hit the table. This being a motorcycle website, I’ll keep it entirely based around that. If for example you are “America First” and want all of your motorcycle products built right here at home, keeping jobs right here, fantastic. Using steel out of your own back yard might lead to more job creation, and keeping motorcycles American made might be the way to go. Or is it?

    Let’s look at an American company like Harley Davidson. Harley sells the brunt of its motorcycles to the American market, close to 150,000 in 2017 alone. Great, they areincredibly well marketed, they deserve it. Yet, they also sold around 40,000 to the European market in that same year. This being their 2nd largest market world-wide. So now what happens when the USA slaps tariffs on European made products in an effort to get people to buy locally? Well they are likely to bite-back on American made products like luxury items. No matter how much you don’t think you could live without your Harley, it is in fact a luxury item and not the necessity you might feel it is.

Tax The E.U., Who Cares

    If the U.S. is going to slap taxes on the E.U. and the E.U. is going to bite back, then here lies a pending problem. Companies like Harley are not going to want to lose a competitive edge to bikes locally designed in E.U., like BWM. In a effort to stay competitive they are more likely to eat the costs of the taxes that then chews right into their bottom line.

The previous tax of %6 imposed on Harley will then explode to %31. In the short run Harley absorbs the %25 difference, or an estimated 100-million dollars. This will take money right out of investor pockets who will then be looking at ways to save money. Two extremely probably scenarios to make up the difference will be to streamline operations via layoffs on the USA production side of things. Or a long-term and irreversible possibility that they move a portion of the manufacturing process to Europe and other international plants.

The Big Picture

    No matter what brand of motorcycle you support or what political party you’re behind you are likely going to feel the tariff effects. All motorcycles are made up from a large portion of steel and plastics that are derived from overseas and at home. Naturally the more parts that are manufactured out of country where labour is considerably cheaper, the easier it will be to keep selling costs low at home. A real game changer, it could mean a global reconsideration of what out of country manufacturing, imports and overseas sales look like. “America First”, might becoming right of your backyard or even out of your back pocket.