USA President Donald Trump’s careless trade policy is backfiring. Protective duties have unintended consequences: motorcycle-maker and Americana-bastion Harley-Davidson said in a regulatory filing that Trump tariffs will displace its production of its European- bound motorcycles to the European Union. Harley estimates that Trump tariffs on steel and aluminium would add an addition $2,200 to the cost of each bike sold in Europe. This, after the EU said on Friday it will hang EUR 2.8 billion of tolls on US imports including bourbon whiskey, jeans and motorcycles.
Harley’s stock fell sharply, down more than 5% at one point. However, it’s difficult to tell if the move was purely about tariffs or general weakness at the company. Since the start of 2018 plant closures and subsequent layoffs of some 800 workers have been impossible to miss – despite Republican lawmakers claiming Harley benefits from Trumps trade and tax policy.
Trump misses that only 20% of world’s trade is conducted with the USA and partners. The other 80% is transacted between non-US nations. Shifting production to the EU not only avoids US trade wars, but gives access to other markets without trade barriers. If trade relations with China, the EU and NAFTA spiral out of control, the US will be isolated. This policy shift from taxes to tariffs is unsettling markets. In the current environment (plus expectations for the European Central Bank), we see long Euro as the idea position.
By Peter Rosenstreich