Harley-Davidson Hit With EU Tariff Ruling

Date: Wednesday, April 21st, 2021
Source: Wall Street Journal

Harley-Davidson Inc. HOG +1.91% has been hit with a European Union import ruling that the motorcycle maker says would impose an import tariff of 56% on its products and keep it from functioning competitively in Europe.

The Milwaukee-based company announced the ruling along with better-than-expected sales and profit for the first quarter, news of which lifted the stock to a new multiyear high.

Harley-Davidson has been one of the highest-profile U.S. casualties of recent trade disputes, after the EU put a 25% duty on its bikes and other U.S. goods in 2018. Those levies were a response to tariffs the Trump administration imposed on steel and aluminum from producers in Europe and elsewhere.

On Monday, Harley-Davidson said Belgium’s Economic Ministry, on behalf of the EU, had notified the company that it was revoking an agreement that allowed the business to supply Europe with certain motorcycles produced at its international manufacturing facilities at tariff rates of 6%.

Harley-Davidson said the EU ruling would apply to its entire lineup and subject all products—regardless of origin—to a 56% import tariff within the trade bloc beginning June 1.

The European Commission, the EU’s executive arm, declined to comment.

The company also released its quarterly result Monday. Harley-Davidson’s earnings jumped to $259.1 million in the first quarter, from $69.7 million in the year-ago quarter. Revenue improved to $1.42 billion from $1.3 billion.

Harley-Davidson said motorcycle sales rose 30% in North America for the first quarter. As a result, the company raised its 2021 forecast for motorcycle revenue growth to between 30% and 35%, up from its previous projection of 20% to 25%.

Shares of Harley-Davidson rose 9.7% Monday, closing at $44.29, its highest closing price since 2018.

Harley-Davidson had lowered its EU tariff bill by sending motorcycles to Europe that were made in Thailand. With the end of that arrangement, the company now finds itself battling EU trade authorities over a tariff imposed on motorcycles that are no longer produced in the U.S.

The motorcycle maker said it plans to lodge an immediate legal challenge to what it called an unprecedented decision that “underscores the very real harm of an escalating trade war to our stakeholders on both sides of the Atlantic.”

The Office of the U.S. Trade Representative declined to comment.

Harley-Davidson received word of the EU’s tariff increase late Friday, a person familiar with the matter said.

While the EU’s original round of tariffs hit other high-profile U.S. goods, such as jeans made by Levi Strauss & Co. and Kentucky bourbon, vocal support from then-President Donald Trump pushed Harley-Davidson into the spotlight as a U.S. victim of the trade barbs exchanged in recent years between the U.S. and Europe and China.

Harley-Davidson said in 2018 that EU tariffs would raise the cost of each bike shipped to the trade bloc from the U.S. by about $2,200. Rather than raise prices, the company said it would shift production of motorcycles for the EU market to outside the U.S., prompting Mr. Trump to accuse the company of raising the white flag.

More recently, the U.S. and EU have suspended some import tariffs. In March, the two sides agreed to suspend tariffs on wine, luggage, produce and other goods related to a longstanding dispute over government subsidies to Boeing Co. and Airbus SE. Washington also suspended tariffs on U.K. luxury goods, including Scotch.

Europe, the Middle East and Africa had been among Harley-Davidson’s largest markets outside of the U.S., but its first-quarter results showed almost 3,000 fewer motorcycles sold in the sales region, marking a 36% decline from a year earlier.

The company attributed the decline to shipping delays related to the pandemic and its decision to stop selling some popular motorcycle models in the region.

Harley-Davidson will soon offer a new motorcycle known as the Pan America and designed for on-road and off-road use. Company executives anticipate the model will be popular in Europe.

The EU tariff decision comes at a time when the company has curtailed sales activities in lesser foreign markets to focus on North America, Europe and Japan. Harley-Davidson is in the midst of overhauling its sales and production strategies under Chief Executive Jochen Zeitz, a longtime director picked for the top post early last year. The company in 2020 slashed production of motorcycles as part of a plan to reduce inventories of bikes at dealers and boost prices for used models.


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