Harley-Davidson warns Trump-EU trade war will harm business

US motorcycle maker Harley-Davidson has warned that its profit margins this year are likely to halve as trade tariffs bite.

The company said profit margins will be 9-10%, compared with 20% a year ago.

Despite this, its most recent quarterly performance beat estimates after sales outside the US rose by 2.4% to 29,546.

The company was singled out by the EU for tariffs in response to action by President Donald Trump against steel and aluminium exports to the US.

It says it will move some production out of the US to get round these.

Harley-Davidson expects added costs of $45m-$50m this year, due to the EU tariffs, as well as higher aluminium and steel prices. The measures are likely to pinch profits next year as well, it added.

“It is our aim to mitigate those over time, but this is going to take some amount of work,” the firm said on a call with financial analysts.

The company plans to increase investment in its international plants, though it has not said which ones.

Harley-Davidson’s total sales for the three months to the start of July were 72,593, down 11.3% from last year. Net income fell to $248.3m (£189.1m) from $258.9m a year earlier.

‘Tariffs are the greatest!’

Mr Trump, who has criticised Harley-Davidson for its decision to shift production for the EU overseas, turned to Twitter on Tuesday to say he plans to stick with his protectionist strategy.

“Tariffs are the greatest!” he wrote, ahead of a meeting with European Commission President Jean-Claude Juncker.

“Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs.”

Mr Trump has said tariffs on steel and aluminium imports, which came into force this spring, are necessary to protect the US steel and aluminium industries, which he maintains are vital to national security.

They have drawn retaliation from the EU, Canada, Mexico, India and others while driving up the cost of metals for manufacturers in the US.

The US has also threatened to hit billions of Chinese imports with import taxes, some of which are already in effect. It is also considering tariffs on foreign cars and vehicle parts.

Harley-Davidson said last month that the EU’s tariffs would add, on average, $2,200 (£1,660) to each bike exported to Europe from the US as the import tax increases from 6% to 31%.

It is planning to shoulder some of those costs, in an effort to support sales.