Trump makes U-turn to support Harley-Davidson as profits fall amid tariff war

Edward Helmore in New York

Harley-Davidson blamed European taxes on imports of its gas-guzzling hogs for a 27% drop in profits in the first quarter, prompting Donald Trump to vow retaliation against the EU.

“So unfair to US. We will reciprocate!” the president tweeted.

Related: Harley-Davidson lovers in Milwaukee discuss Trump, tariffs … and time

Trump’s support comes after he called for a boycott of the motorcycle company following its decision to move some production to Thailand – a move the company said was necessary to cut costs after the EU slapped tariffs on Harley in retaliation for Trump’s tariffs on steel and aluminum imports.

In a conference call on Tuesday, Harley chief executive Matt Levatich confirmed the company’s performance had been hit by tariffs, both in terms of imported raw materials and on European sales. Tariffs on Harley’s motorcycles have jumped from 6% to 31% and are scheduled to rise again to 56% in June 2021.

“The big impact for us is European Union tariffs,” Levatich said. He added that Harley could not afford its growth potential in Europe to be “hamstrung by incremental tariffs” and described the situation as “unfortunate”.

Levatich went on: “We’re pursuing our strategy to get to the European marketplace through our international manufacturing footprint. Clearly this is an imperative for us as a business and we’ll continue to execute that strategy unless or until circumstances change.”

Levatich said European sales were down 8.1%, while sales to the UK had declined by double digits – a drop he blamed on consumer uncertainty around Brexit.

Trump’s support came as Harley said global sales had fallen 3.8% in the first quarter. Harley reported first-quarter net income of $127.9m on consolidated revenue of $1.38bn, compared to $174.8m on consolidated revenue of $1.54bn in 2018, a decline of 26.8%.

Harley-Davidson said it expected full-year shipments in the range of 217,000 to 220,000 compared to 228,051 in 2018.

On Tuesday, Harley said it was planning to expand its product line to appeal to younger riders, as sales to older riders of the largest hog-style of bike have declined sharply.

Research has identified a persistently weak market for large motorcycles caused by an ageing ridership and problems attracting youngsters less attached to Harley’s heritage and tradition. Earlier this month, Wells Fargo said the company faced a “long path to stabilization” despite drawing up an ambitious plan to revamp its motorcycle line.

However, Wells Fargo offered a note of optimism in Harley’s plans to introduce a range of smaller bikes and electric-powered models that could attract a younger demographic and international expansion, particularly in Asia.

Harley’s first of five electric models, called LiveWire, comes with a hefty $29,799 price tag that analysts believe will limit its appeal. The bike is being launched in August. No release date for other models, including a scooter, have been announced.

The latest figures represent a continued conflicted story for Harley, which has one wheel on the road and another in the ditch. In January, Harley reported a drop in worldwide sales of 6.7%. The company barely broke even in the last quarter of 2018, with sales dropping 10% in December – its eighth month of decline – with stock plunging 33% for the year.