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Harley's shifting of gears: self-inflicted wound by US

By Zhao Huanxin | China Daily USA | Updated: 2018-06-26 23:02

US motorcycle maker Harley-Davidson's announcement on Monday to move some of its manufacturing out of the United States is the latest reminder that the Trump administration's unilateral measures to increase tariffs are causing self-inflicted wounds.

The Wisconsin-based company, which US President Donald Trump called a "true American icon" and thanked for "building things in America" in a meeting last February, said it will implement a plan to shift production of motorcycles for EU destinations from the US to its international facilities to avoid retaliatory tariffs.

The decision came a few days after the European Union rolled out tariffs on $3.4 billion of US goods, including motorcycles, in retaliation for US barriers on imports of European steel and aluminum, which in turn triggered threats of further duties on European cars from Trump.

Screenshot of US President Donald Trump's twitter

Tariffs on motorcycles Harley-Davidson exported from the US to Europe, its second-largest market, jumped from 6 percent to 31 percent, resulting in an average additional cost of $2,200 per motorcycle exported, the company said in a regulatory filing on Monday.

Trump said in the afternoon that he was "surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag".

"Taxes just a Harley excuse — be patient!" he wrote on his Twitter account.

In a series of tweets on Tuesday, Trump lashed out at the iconic US motorcycle maker, threatening it with hefty punitive taxes.

Screenshot of US President Donald Trump's twitter

"If they move, watch, it will be the beginning of the end — they surrendered, they quit!" he tweeted early Tuesday morning. "The Aura will be gone and they will be taxed like never before!"

Experts following the US' escalating trade spat with Europe and beyond are not surprised by Harley-Davidson's action.

Paul Krugman, the Nobel Prize-winning columnist, said what happened to Harley-Davidson will happen tomorrow to "a lot of other businesses".

"Yes, the US runs a trade deficit. But Commerce still estimates that more than 10 million jobs are supported by exports, and many will be put at risk, so will jobs in many US companies that rely on imported inputs," Krugman tweeted on Monday.

Chad P. Bown, Reginald Jones Senior Fellow at the Peterson Institute for International Economics in Washington, said the costs to the US of its own trade policy actions are accumulating.

"Trump's tariffs on inputs like steel, aluminum, or the hundreds of 'parts' on the Section 301 list feed into US production, frequently through cross-border supply chains," he said in an analysis.

Trump's tariff on steel imports has caused Mid Continent Nail Corp in Missouri, the largest such enterprise in the country, to lose about half of its business in two weeks.

"The company employing 500 people earlier this month has laid off 60 temporary workers. It could slash 200 more jobs by the end of July and be out of business around Labor Day," reported on Friday.

Last Wednesday, German automaker Daimler AG said it had lowered its 2018 earnings outlook, a change that it says is partly due to increased import tariffs for US vehicles in China, according to The Associated Press. It said Daimler produces vehicles in the US.

Harley-Davidson is the latest example of how businesses are finding themselves in the crosshairs amid brewing trade fights between the US and its major trader partners. It also proves that winning a trade war isn't that easy.

More businesses, consumers, as well as farmers could increasingly feel the brunt of the tit-for-tat imposing of tariffs - this will happen in Europe, China, and unexceptionally, the US.

With the dominant player in the US motorcycle market hitting the road of shifting production from the US, it is time for policy makers to put a brake on reckless measures and swerve to move ahead cautiously and rationally.

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