Forbes
There aren’t too many brands that are as iconically “American” as Harley Davidson. And when Donald Trump invoked the “Hogs” in his speech to the nation Tuesday night, he thought he was calling attention to unfair trade deals inhibiting American companies and workers abroad.
Not so fast. It turns out that the high tariffs faced by Harley when trying to sell its bikes overseas would have been substantially removed by the Trans-Pacific Partnership, which Trump squashed his first days in office. In Vietnam, for example, Harley faces a 74% tax. It would have been zero if the U.S. signed on to TPP. Indeed, Harley’s CEO and chief lobbyist publicly advocated for TPP last year.
Trump repeatedly called TPP a U.S. “job killer.” Trade experts disagree, arguing that it was just the opposite, but got caught up in the political rancor and rhetoric of a campaign, rightfully referred to as “the silly season.”
Trump seems fairly fact-challenged in his use of Harley to call attention to unfair trade. He complained that there is one country that charges a 100% tariff on imported motorcycles. That’s true. It’s India. But Harley has a factory in India that supplies bikes to consumers there, so those bikes aren’t subject to the tariff. India, a developing country, put heavy tariffs on some categories of products to force companies to build factories in their country and create jobs for their working class. Indonesia, another country with a tariff, hits imported motorcycles*with a 40% tax for the same reason.
In a statement, Harley-Davidson said it opened the plant in India in 2011 “to improve production flexibility, market responsiveness and strengthen operations in the country.” It doesn’t address whether the tariff played a part in its decision, but it did, of course. India is a huge market for motorcycles and scooters – 16.5 million per years. Harley has less than a 1% share of that market. But that is because Harley does not make the kinds of bikes that are most popular in India, where there are many manufacturers vying for share at much lower price points.
Tariffs on motorcycles are common across the Asia-Pacific region. Besides India and Indonesia, China levies a 30% tariff, as does Malaysia. Thailand hits Harley with a 60% tariff, and Taiwan’s tariff is 20%. Malaysia and Singapore were also part of TPP, and there was hope that Indonesia would have joined it eventually. The 12 countries in TPP account for one-third of global trade, according to The Peterson Institute for International Economics.
Harley relies heavily on overseas sales. Last year, the company reported 40% of its sales were outside the U.S. And despite the tariffs in Asia, it had a record year in the Pan-Asian region, selling 33,000 bikes – not bad considering Harley’s bikes are among the most expensive available in those markets.
Ironically, while Harley has been a big loser from Trump’s pull-out from TPP, the big winner is China, the country he has been most vocal about in terms of wanting to make it harder for Chinese goods to get into the U.S.
Without the U.S. in TPP, China is free to dominate the Pan-Pacific region through trade. “China’s ambitious One-Belt-One-Road and Asian Infrastructural Investment Bank initiatives will also be strengthened by a perceived or actual U.S. pullback from Asia [as a result of leaving the TPP],” says Linda Lim, professor of a strategy at the Stephen M. Ross School of Business at the University of Michigan.
No wonder Harley CEO*Matthew Levatich seems uneasy in the spotlight with Donald Trump using Harley as a poster-brand for his supposed fair-trade policy. The new president already killed the one deal that would have helped the motorcycle company. The focus on Harley*isn’t all bad, though. Shares of Harley climbed 3.58% Wednesday, compared with the Dow Jones Industrial Average, which was up 1.46%.
There aren’t too many brands that are as iconically “American” as Harley Davidson. And when Donald Trump invoked the “Hogs” in his speech to the nation Tuesday night, he thought he was calling attention to unfair trade deals inhibiting American companies and workers abroad.
Not so fast. It turns out that the high tariffs faced by Harley when trying to sell its bikes overseas would have been substantially removed by the Trans-Pacific Partnership, which Trump squashed his first days in office. In Vietnam, for example, Harley faces a 74% tax. It would have been zero if the U.S. signed on to TPP. Indeed, Harley’s CEO and chief lobbyist publicly advocated for TPP last year.
Trump repeatedly called TPP a U.S. “job killer.” Trade experts disagree, arguing that it was just the opposite, but got caught up in the political rancor and rhetoric of a campaign, rightfully referred to as “the silly season.”
Trump seems fairly fact-challenged in his use of Harley to call attention to unfair trade. He complained that there is one country that charges a 100% tariff on imported motorcycles. That’s true. It’s India. But Harley has a factory in India that supplies bikes to consumers there, so those bikes aren’t subject to the tariff. India, a developing country, put heavy tariffs on some categories of products to force companies to build factories in their country and create jobs for their working class. Indonesia, another country with a tariff, hits imported motorcycles*with a 40% tax for the same reason.
In a statement, Harley-Davidson said it opened the plant in India in 2011 “to improve production flexibility, market responsiveness and strengthen operations in the country.” It doesn’t address whether the tariff played a part in its decision, but it did, of course. India is a huge market for motorcycles and scooters – 16.5 million per years. Harley has less than a 1% share of that market. But that is because Harley does not make the kinds of bikes that are most popular in India, where there are many manufacturers vying for share at much lower price points.
Tariffs on motorcycles are common across the Asia-Pacific region. Besides India and Indonesia, China levies a 30% tariff, as does Malaysia. Thailand hits Harley with a 60% tariff, and Taiwan’s tariff is 20%. Malaysia and Singapore were also part of TPP, and there was hope that Indonesia would have joined it eventually. The 12 countries in TPP account for one-third of global trade, according to The Peterson Institute for International Economics.
Harley relies heavily on overseas sales. Last year, the company reported 40% of its sales were outside the U.S. And despite the tariffs in Asia, it had a record year in the Pan-Asian region, selling 33,000 bikes – not bad considering Harley’s bikes are among the most expensive available in those markets.
Ironically, while Harley has been a big loser from Trump’s pull-out from TPP, the big winner is China, the country he has been most vocal about in terms of wanting to make it harder for Chinese goods to get into the U.S.
Without the U.S. in TPP, China is free to dominate the Pan-Pacific region through trade. “China’s ambitious One-Belt-One-Road and Asian Infrastructural Investment Bank initiatives will also be strengthened by a perceived or actual U.S. pullback from Asia [as a result of leaving the TPP],” says Linda Lim, professor of a strategy at the Stephen M. Ross School of Business at the University of Michigan.
No wonder Harley CEO*Matthew Levatich seems uneasy in the spotlight with Donald Trump using Harley as a poster-brand for his supposed fair-trade policy. The new president already killed the one deal that would have helped the motorcycle company. The focus on Harley*isn’t all bad, though. Shares of Harley climbed 3.58% Wednesday, compared with the Dow Jones Industrial Average, which was up 1.46%.
