What's going on?
Harley-Davidson reported second-quarter results on Tuesday that overtook expectations – though the iconic American motorcycle maker is still caught between the US and Europe like a chopper between two trucks. (tweet this)
What does this mean?
Harley’s results roared ahead of analysts’ expectations for the sixth quarter in a row, though its sales and profits both dropped. It’s suffering from a slump in American demand (US retail sales fell by nearly twice as much as worldwide) and being squeezed by import taxes (a.k.a. tariffs) the European Union (EU) imposed in response to US tariffs on steel and aluminum. The new taxes add about $2,200 to the price tag of each bike imported into Europe – Harley’s second-biggest market. And this is on top of Harley’s increased costs of getting its hands on steel and aluminum (important metals for its bikes) stateside.
Why should I care?
For markets: Harley’s in the woods, but it’s got a roadmap.
Harley shares rose by 8% on Tuesday but are still down this year – with investors likely concerned about the company’s candle being burned at both ends by rising costs and falling sales. However, to steer around the EU’s tariffs, Harley’s announced plans to move production of its bikes destined for Europe out of the US altogether – a move that the US president has threatened with… wait for it… even more taxes. It’s also releasing a new strategy next week to grow its overseas ridership.
The bigger picture: Trade wars cost many.
Nothing happens in a vacuum; tariffs imposed by the US have global consequences. China, Canada and Mexico (among others) have responded with their own tariffs and the EU’s retaliatory measures are targeting classic American produce – like blue jeans, bourbon, cigarettes and peanut butter – along with motorbikes. It looks like the game of one-upmanship is biting away at everyone involved.