X

Harley Davidson Loves Tariffs

June 28, 2018

by Michael Stumo, CEO of CPA

Contrary to what you may have heard, Harley Davidson, the iconic American motorcycle company loves high tariff countries. Company management loves tariffs so much, it moves production to countries with the highest motorcycle tariffs in the world.

Harley Davidson was founded in Wisconsin in 1903. America now has among the lowest tariffs on imported motorcycles in the world, averaging less than 1%. US leaders believed, in the past, that unilateral tariff reduction would be good for our country. But our low tariff country does not fit the HD's business plan.  

Instead, Harley moves production to high tariff countries. When the EU announced it would impose 31% import tariffs on motorcycles, the company announced it was moving some production there and out of the US. Only five countries have higher motorcycle tariff levels.

But this is not the first time Harley has chased high tariff countries. It has now become a pattern.

The company has a plant in Bawal, India.  India has the highest motorcycle tariffs in the world at 100%. I'll say it differently, no country in the world has higher tariffs on motorcycles than India.

Harley has a plant in Rayong, Thailand. Thailand has 60% tariffs on imported motorcycles, the third highest in the world after India and Vietnam.

The company also has a plant in Manaus, Brazil.  Brazil has 20% tariffs on imported motorcycles. To put this amount in perspective, nearly 100 other countries have lower tariffs on motorcycles than Brazil.

Harley also was "delighted" by the tariffs imposed by President Reagan in 1983. 

''We're delighted,'' said Vaughn L. Beals, Harley-Davidson's chairman. ''It will give us time that we might otherwise not have had to make manufacturing improvements and bring out new products.''

Therefore the real Harley story is that the company chases high tariff countries and flees low tariff countries... a story that predated the EU tariff announcement.

Table: Motorcycle tariffs around the world

COUNTRY YEAR TARIFF LEVEL
India 2016 100
Thailand 2016 60
Brazil 2017 20
Vietnam 2017 68.97
Pakistan 2016 50
China 2017 43.33
Laos  2018 36.88
Angola 2016 34.17
Cameroon 2014 30
Central African Republic 2016 30
Chad 2016 30
Congo 2014 30
Egypt 2017 30
Gabon 2013 30
Philippines 2017 28.92
Ecuador 2014 28.44
Nepal 2016 27.78
Algeria 2017 26.32
Argentina 2017 25.63
Bangladesh 2016 24.21
Zimbabwe 2017 22.14
Indonesia 2016 22
Djibouti 2014 21.83
Colombia 2017 20.63
Congo 2015 20
Madagascar 2016 20
Mauritania 2014 20
Mozambique 2016 20
Samoa 2014 20
Tonga 2016 20
Uruguay 2017 20
Venezuela 2015 20
Malaysia 2017 18.9
Vanuatu 2017 17.86
Paraguay 2016 17.5
Dominican Republic 2017 16.73
Armenia 2016 16.34
Russian Federation 2016 16.34
Kazakhstan 2017 15.13
Albania 2018 15
Cabo Verde 2015 15
Cambodia 2017 15
Cuba 2017 15
Saint Kitts and Nevis 2014 15
Solomon Islands 2016 15
Macedonia 2017 15
Chinese Taipei 2017 14.88
Burundi 2017 14.58
Kenya 2017 14.58
Rwanda 2017 14.58
Tanzania 2017 14.58
Uganda 2017 14.58
Jordan 2017 14.12
Benin 2017 13.08
Burkina Faso 2017 13.08
Côte d'Ivoire 2017 13.08
The Gambia 2017 13.08
Guinea-Bissau 2017 13.08
Liberia 2013 13.08
Mali 2017 13.08
Niger 2017 13.08
Nigeria 2016 13.08
Senegal 2017 13.08
Togo 2017 13.08
Guinea 2017 13
Antigua and Barbuda 2016 12.5
Barbados 2013 12.5
Dominica 2015 12.5
Grenada 2016 12.5
Guyana 2013 12.5
Haiti 2016 12.5
Saint Vincent/Grenadines 2013 12.5
Suriname 2016 12.5
Trinidad and Tobago 2013 12.5
Tunisia 2016 12
Morocco 2017 11.67
Malawi 2017 11.25
Jamaica 2016 10.88
Belize 2016 10.83
Mexico 2017 10.5
Bolivia 2017 10
Kyrgyz Republic 2014 10
Saint Lucia 2015 10
Tajikistan 2014 10
Ukraine 2017 10
Honduras 2014 8.18
Republic of Korea 2017 8
El Salvador 2018 7.08
Israel 2017 7
Turkey 2015 7
European Union 2018 6.73
Montenegro 2017 6.36
Chile 2017 6
Peru 2015 6
Panama 2017 5.63
Bahrain 2016 5
Fiji 2017 5
Kuwait 2016 5
Moldova 2017 5
Mongolia 2017 5
Myanmar 2018 5
Nicaragua 2017 5
Oman 2017 5
Qatar 2017 5
Saudi Arabia 2015 5
United Arab Emirates 2016 5
Yemen 2016 5
Australia 2017 1.43
Sri Lanka 2015 0.71
Botswana 2016 0
Brunei Darussalam 2017 0
Canada 2017 0
Costa Rica 2017 0
Eswatini 2016 0
Georgia 2017 0
Ghana 2013 0
Hong Kong 2017 0
Iceland 2017 0
Japan 2017 0
Lesotho 2016 0
Macao, China 2017 0
Mauritius 2017 0
Namibia 2016 0
New Zealand 2017 0
Norway 2017 0
Papua New Guinea 2014 0
Seychelles 2018 0
Singapore 2017 0
South Africa 2017 0
Zambia 2016 0

 

SOURCE: WORLD TRADE ORGANIZATION


Showing 1 reaction

Please check your e-mail for a link to activate your account.
  • Jim Crawford
    Good Morning Michael!

    Interesting analysis of HD, demonstrates the value of an economic research assistant too!

    Tariffs, tariffs, tariffs; everyone it seems believes money rules the world, or at least should. Is there a limit to its power? What if other nations have evolved their system of political-economy to exploit money’s limits?

    Is the correct response to try to make money even more powerful, say by taxing international capital flows to forcibly adjust exchange rates?

    Would that solve the problem? Probably not, but it would surely be helpful and provide a new means of taxation aimed directly at the problem Piketty discusses: the return on capital exceeding the rate of economic growth.

    What if, however, the entire global monetary system was thought of as one form of power and the capacity of deliberative democracies to set absolute quotas on imports was recognized as a complementary power?

    Quotas, in that case, would provide an affirmative national industrial policy, which is what stable political coalitions can form around.

    The Trump presidency is a grand poetic moment in the life of our nation, a grand experiment in breaking down our familiar patterns of discourse.

    At present domestic manufacturers are seeking to exploit this opportunity for their own gain, Nucor included. But the Trump presidency should also be used to break open the discourse on the subject of quotas and industrial policy.

    The most promising venue for such a maneuver, in my opinion, is the production of domestic hardwood furniture.

    Perhaps your incoming economic analyst should take a look at that possibility.