Harley-Davidson and Tariffs

There’s an irony here which has largely gone unmentioned:

U.S. President Donald Trump on Monday slammed Harley-Davidson Inc (HOG.N) after the motorcycle maker said it would move production for European customers overseas to avoid retaliatory tariffs that could cost it up to $100 million per year.

Trump said he has fought hard for the company and was surprised by its plans, which he described as waving the “White Flag.”

Harley-Davidson, the dominant player in the heavyweight U.S. motorcycle market said earlier on Monday it would not pass on any retail or wholesale price increases in the EU and instead focus on shifting some U.S. production.

So, Harley-Davidson doesn’t like tariffs and will re-arrange its operations to avoid feeling the consequences of them. Fair enough, but:

With an economic recession causing sales of all motorcycles to slide, with even Japanese manufacturers like Honda Motors (NYSE:HMC), Kawasaki, and Yamaha overestimating demand, Harley’s delicate financial condition couldn’t afford the discounting the oversupply was causing. Despite the Japanese bike makers offering to help Harley make it through the crunch by giving it technological assistance and providing tens of millions of dollar in loans to keep it going, Harley instead chose protectionism and petitioned the Reagan administration in 1982 to raise tariffs.

As it had been since the 1940s, Harley-Davidson was the U.S. bike industry, being the lone American bike maker left in the market, although Honda and Kawasaki did have a single plant each located in the U.S. But with Harley’s global market share slipping, the U.S. International Trade Commission determined that Honda, Kawasaki, Suzuki, and Yamaha had hurt Harley’s business, and advocated a tariff hike. Reagan ended up raising the tariffs from 4.4% to 49.4%, though the rates were to fall by a set amount each year thereafter, with their removal or extension decided after five years.

The article goes on to suggest the tariffs on Japanese motorbikes didn’t save Harley-Davidson, but it did give them a much needed shot in the arm.

However, Harley-Davidson staged a dramatic recovery, with sales rising so fast that after just four years it petitioned the government to lift the tariffs, saying it no longer needed protection, making this a simple success story of targeted trade protection.

I don’t know if Trump is aware of the history of Harley-Davidson and tariffs; if he is, it might explain why he’s rather annoyed with them.

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7 thoughts on “Harley-Davidson and Tariffs

  1. Honda motorcycles sold in the US are made in Marysville, OH, from imported parts, so tariffs against Honda motorcycles are only partially effective. Harley-Davidson’s problems lie mainly with management and labor.

  2. HD’s strength does not lie in its engineering innovation and expertise. Their bikes remain much like the American muscle cars of old – crude, powerful, and macho.

    They sell an iconic piece of American history. It’s interesting to me that they are willing to bet the farm that “iconic pre-woke American” will be a huge selling point throughout Europe.

    It’s also interesting that they’d be willing to risk their American market to do so. I’d guess that the vast majority of American HD riders were Trump voters. To so publicly cross Trump over this issue seems unwise.

  3. HD bikes haven’t actually been any good for years – other manufacturers all make bikes which are either far faster, far more comfortable, or both.

    HD’s genius has been marketing an image of American Muscle, and thus selling a status symbol. Its rather like the way folk would pay substantially extra for a Mondeo with a jag badge on, despite it being no better a car… no actual engineering required (HD bikes tend to have insane cubic capacity engines, which then rev at speeds a ships engine would be proud of, and consequently generating almost no power output).

  4. I was out for a ride with a group of other motorcyclists when one of the Harley riders announced that his bike had been upgraded with an ’04 front brake disk and calliper. I innocently enquired if it was from a 1904 or a 2004 bike. You can imagine the response.

    They haven’t changed much between those years and when they got Porsche to design a more up to date water cooled engine, the motorcycling press were virtually unanimous in their response – don’t buy it. It’s not a REAL HD.

    So you are stuck with an engine that was designed about 100 years ago and virtually unchanged since then (except for electrics/emissions and perhaps better metallurgy). The mystique is what keeps the company afloat, not engineering and not from people who like to ride motorbikes as opposed to polishing them.

    Still, the vibrations from the 60 degree lump of an engine make vasectomy unnecessary.

  5. I was in Aus, Adelaide during Christmas ’95, they have a huge 10, 000 bike rally, the Toy Run for childrens charities.
    As my friend was a biker and ex racer we went to the rally, it was a terrific event with many bike clubs there.
    The local Harley Davison club was there in force with a truck ? I asked what the truck was for, the answer came and it was not a lie, they never go on club outings without the truck as someone is always breaking down and it was to bring the bike home, the story was corroborated by several others including a Harley rider.

  6. “Honda motorcycles sold in the US are made in Marysville, OH, from imported parts, so tariffs against Honda motorcycles are only partially effective.”

    All of them? Last I paid any attention, it was only Gold Wings, but if you’re claiming that 250 motocrossers and VFRs are assembled in Ohio, fine.

    Onlookers are invited to check for themselves.

  7. In addition to the ubiquitous truck to cart back the rolling wounded, many many Harley Riders I know actually trailer the thing to where they want to be, as opposed to the Goldwing and BMW riders that ride it there.

    I’ve had bikes since I was in high school. Used to have a cool neighbor that I’d ride with. Whenever we heard a Harley rolling by in nice weather he’d say – “It’s a nice day! The bees are out!”. First time he said that I asked what he meant, and he said it was over 70, so the Harley guys could get their bikes started.

    He ended up buying one to fix and sell at one point. He said they had to keep stopping on the way home to pick up pieces that were falling off. His assessment of the AMF Harley he bought was “A farm tractor! it’s a goddam Willis farm tractor!”

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