Tuesday, June 26, 2018

How's that trade war going?

Last month, Donald Trump started a trade war with the rest of the world. So how's it going? Badly:

Harley-Davidson said on Monday that it will move production of EU-bound motorcycles out of the US in a bid to combat costs linked to tariffs on various American products.

The EU is Harley-Davidson’s second biggest market in terms of revenues outside of the US.

The motorcycle maker said the tariffs, which came into effect on 22 June in response to levies imposed by Donald Trump on steel and aluminium imports, had risen from 6 per cent to 31 per cent.

This translates into a cost of around $2,200 (£1,700) per motorcycle exported from the US to the EU.

Not mentioned: US production is probably facing higher input costs due to the steel and aluminium tariffs as well. So moving some production away from that seems like a good idea.

Naturally, this is the opposite of what Trump wanted when he started sticking tariffs on other countries. But its what happens in a globalised economy where your biggest market might not be domestic. And the longer Trump's tariffs continue, the more likely other companies are to follow.