Harley-Davidson on Monday announced that it would move production for its European customers overseas, in order to avoid the European Union’s (EU) new import duties. President Trump slammed the move and accused the company of raising the “white flag” of economic surrender on Twitter.
A Harley-Davidson should never be built in another country-never! Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end – they surrendered, they quit! The Aura will be gone and they will be taxed like never before!
— Donald J. Trump (@realDonaldTrump) June 26, 2018
Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag. I fought hard for them and ultimately they will not pay tariffs selling into the E.U., which has hurt us badly on trade, down $151 Billion. Taxes just a Harley excuse – be patient! #MAGA
— Donald J. Trump (@realDonaldTrump) June 25, 2018
American Greatness reports,
Trump is right. Harley-Davidson’s decision is perhaps the most incompetent public relations blunder since Starbucks said it would replace 10,000 American workers with Syrian refugees—no doubt they will pay a heavy price.
In the meantime, Harley’s loss is our gain, as every individual failure makes the whole stronger.
A Bittersweet Vindication
Before beginning, let’s get some preliminary facts straight. In 2017, Harley-Davidson sold around 40,000 new motorcycles in Europe. And although Europe is Harley’s second largest market, it still accounts for a mere 16 percent of the company’s global sales—Harley is an American company with a predominantly American market. Furthermore, Harleys are (mostly) American-made.
Regarding the tariffs: on June 22 the EU’s new 25 percent import duties came into effect. These were levied in response to President Trump’s own tariffs—apparently, the EU forgot it already imposes significant tariffs, and other nonmonetary import restrictions, on American goods.
Harley estimates that these tariffs will raise the price of their European bikes by an average of $2,200. Assuming that this will hurt their sales, they announced that they will offshore a fraction of their production to Europe—not their entire production-base, as some distortion-artists claim. Now that we’re all on the same page, let’s proceed.
The first point worth mentioning is obvious: Harley’s announcement proves tariffs work. By raising the cost of importing American motorcycles, EU tariffs created a powerful incentive for Harley-Davidson to invest in Europe. They responded to this incentive. Now Europe will have its own slice of Harley’s pie—and benefit from the capital investment, jobs, and technical know-how that Harley will bring with them. Imagine that.
Of course, the free trade brigade will doubtlessly rant about how Trump’s “trade war” harmed America by driving Harley-Davidson abroad. In this instance, I’d agree. Wars have casualties—even trade wars. But let’s not miss the forest for the trees: Trump’s tariffs will benefit far more American companies than they hurt, and will thereby create more jobs than they destroy.
There are two reasons for this. First, because labor-intensive (or what sophists term “inefficient”) jobs are the first to move offshore, international trade necessarily destroys more jobs than it creates. For example, a 2014 study by Robert Scott found that the North American Free Trade Agreement (NAFTA) displaced a net 851,700 American jobs—the exact opposite of what Bill Clinton claimed.
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