The Harley-Davidson Tariff Backfire
The U.S. motorcycle maker moves more production overseas.
By The Editorial Board The Wall Street Journal, Aug. 19, 2024
Donald Trump and Kamala Harris are vying for votes in the Midwest, and both seem to think tariffs on foreign imports are political winners. Too bad the losers will be American workers, businesses and consumers, as the tale of Harley-Davidson demonstrates.
The Milwaukee Journal Sentinel recently reported that the U.S. motorcycle manufacturer plans to shift more production to Thailand. Calling the move “a kick in the teeth to American workers,” International Association of Machinists and Aerospace Workers President Brian Bryant has importuned Congress and the White House to intervene.
How about calling for a reversal of the Trump-Biden tariffs that are partly to blame? Recall how President Trump’s steel and aluminum tariffs in 2018 prompted foreign governments to retaliate. The European Union slapped 31% tariffs on Harley motorcycles made in the U.S. China imposed 55% duties on U.S.-made motorcycles.
Because such tariffs would have rendered Harley less globally competitive, it shifted production intended for foreign customers to a new factory in Thailand. In 2019 it closed a factory in Kansas City and consolidated manufacturing in Wisconsin and York, Pa. Mr. Trump then kicked Harley by encouraging a boycott. Its U.S. sales fell 15% between 2017 and 2019.
Enter President Biden, who has maintained his predecessor’s tariffs. Meantime, inflation fueled by his spending has increased Harley’s production costs and dented U.S. sales, which have fallen another 20% since 2019. Asian markets make up a growing share of its sales. To stay globally competitive, Harley is shifting more production to Thailand.
Harley illustrates how the Trump tariffs and Mr. Biden inflationary policies are harming American manufacturing. U.S. manufacturing output declined in 2019 amid Mr. Trump’s trade fusillade and is now lower than a decade ago.
The Biden Administration is trying to mitigate the damage at Harley with an $89 million grant to retrain its union workers in Pennsylvania to manufacture electric motorcycles with “sustainable materials, energy efficient assembly equipment and waste reducing paint technologies.”
According to the Energy Department, Harley will “hire construction workers at prevailing wages,” retain its “longstanding, skilled and unionized workforce at wages exceeding the 95th percentile for the area and industry” and provide “meaningful investments in supplemental transportation, daycare and mental wellbeing resources.”
That’s nice, but such government “commitments” will make it harder to turn a profit. Harley’s LiveWire electric division lost $177,273 on each Hog it sold last year. So now Pennsylvania Sen. Bob Casey and Wisconsin’s Tammy Baldwin—both up for re-election this year—are pushing to enact $7,500 tax credits for electric motorcycles.
Trade protectionism and industrial policy inevitably lead to calls for more government intervention to mitigate the economic damage. Ms. Harris is trying to contrast her brand of protectionism with Mr. Trump’s by calling for “targeted” tariffs. But these, too, will spur foreign reprisals, and the ultimate targets will be U.S. businesses.
Appeared in the August 20, 2024, print edition as 'The Harley-Davidson Tariff Backfire'.