Trade War Severely Affects Harley Davidson Profits

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American President Trump has imposed tariff on imported steel and aluminium. In response, the European Union introduced retaliatory tariffs on some US products like bourbon whiskey, motorcycles and orange juice. According to Harley Davidson, they expect at least $100 million in EU tariff cost in 2019 in addition to $50 million this year.

In order to avoid the tariffs, Harley Davidson said that it will shift some of its production out of the US, a plan that drew a concerned tweet from Trump. According to Chief Financial Officer John Olin, the company is trying everything to absorb the costs but it cannot afford $45 to $55 million as it would lower the profit margin of their motorcycle segment this year.

The $90 million to $100 million tariff to the European Union in 2019 represents most of the profit from the motorcycle segment. US motorcycle sales fell in the 2nd quarter ended July 1. Year after year, Harley Davidson and other manufacturers of cruisers and touring motorcycles have experienced sales falls because baby boomers are avoiding riding due to their age. Fewer people are willing to take their place.

Because of the slump in sales, Harley Davidson said that the company’s net income fell to $242.3 million or $1.45 per share in the 2nd quarter that ended July 1. US motorcycle sales fell by 6.4% while international sales were up by 7% worldwide.

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