Harley-Davidson, the American motorcycle manufacturer, said on Monday that it was shifting some of the production of its bikes outside the United States to avoid European Union tariffs imposed as part of a widening trade dispute.
The announcement, made in a public filing, is an early sign of the financial cost to companies on both sides of the Atlantic as the United States and Europe impose tariffs and counter-tariffs on each other. The moves have raised the specter of a full-blown trade war as the Trump administration pursues a protectionist tack with both allies, including the European Union, Canada and Mexico, and rivals, like China.
Last week, the European Union imposed penalties on $3.2 billion worth of American products, many of which are produced in areas that form the heart of President Trump’s political base, in response to steel and aluminum tariffs added by the White House. The list included bourbon from Kentucky, the home state of the Senate majority leader, Mitch McConnell; as well as orange juice, which is made largely in the swing state of Florida; and motorcycles made by Harley-Davidson, headquartered in Wisconsin, the home state of the House speaker, Paul D. Ryan.
[Wisconsin’s cheesemakers say that aggressive trade policies may shut them out of foreign markets.]
Harley-Davidson said on Monday that European Union tariffs on its motorcycles had increased to 31 percent, from 6 percent. It estimated that the higher tariffs would add about $2,200 on average to every motorcycle exported from the United States to the bloc, so it said it would move the production of bikes bound for Europe outside the United States.
The company sold about 40,000 new motorbikes last year in Europe, equivalent to a sixth of its worldwide sales, making the region its most important market after its home country.
“Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses,” it said in the filing.
Harley-Davidson said the increase in tariffs would cost it an extra $30 million to $45 million for the rest of 2018. It said shifting its production outside the United States would take nine to 18 months. The company said it planned to keep prices for European Union customers steady while that shift was in progress, meaning it would absorb any tariff costs. It did not say how jobs in the United States would be affected.
The company, which is to give more details on the move next month, when it reports second-quarter earnings, has been moving some production overseas for years, somewhat eroding its image as an iconic American brand.