TRUMP’S BAD TARIFFS WILL ONLY GET WORSE

…This US operation will probably be gone within the next 24 months

A long-time Missouri nail company will probably be gone before the end of the year

Our fearless, lying leader doesn’t seem to understand what happened in the 1920’s, when wanting to be isolationists after WWI, the United States put tariffs on all kinds of US manufactured goods and agriculture products.  In hindsight, we know how bad the economy over the following decades became in America.

With the latest move by the iconic American manufacturer, Harley-Davidson (H-D), of shifting production of motorcycles sold to European customers from the US to another site offshore, that should be clear example of a possible repeat of a US Recession, or worse, another Great Depression.

The European Union (EU) imposed tariffs on a range of US products in response to similar levies that President Trump put on steel and aluminum from Europe. The EU tariffs will add $2,200 to the cost of an average H-D motorcycle, threatening “an immediate and lasting detrimental impact to its business,” the company said Monday in a Securities and Exchange Commission filing

For the rest of this year, the company said, the tariffs will add $30 million to $45 million to its expenses. Rather than pass on those costs to consumers in higher prices, Harley said it would absorb them for now, while it develops the move of its production offshore. This will be a major loss of H-D jobs in Michigan, Ohio and Pennsylvania.  The full-year tariff bill could reach $100 million, according to the company.

“Increasing international production to alleviate the EU tariff burden is not the company’s preference, but it represents the only sustainable option to make its motorcycles available to customers in the EU and maintain a viable business in Europe,” the company said.

H-D had already announced that they were in the process of opening up a parts manufacturing operation in Thailand.  They are now seriously looking to Europe for another manufacturing location.  If the tariffs are to continue, it is possible that this “iconic” American company, that President Trump applauded on the White House lawn for keeping its manufacturing here in the US, they could eventually become a foreign motorcycle manufacturer.

The H-D news sent the company’s share price down by nearly 7% in trading on the New York Stock Exchange. Harley’s stock decline came along with a broad market weakness that saw the Dow Jones industrial average fall more than 400 points, or more than 1.7%.  (When the stock market goes down over 2%, that’s usually a sign that there is more bad news coming.  At a 1.7% drop, that’s not a good sign for the market.)

Stupidly, Trump responded Monday saying he was surprised. (What the hell did he expect?)  Then Trump hinted that ultimately the tariffs could go away.  But as usual, he did nothing to explain that statement.

All Trump would say was that he was surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag.  He said he “fought hard for them and ultimately they will not pay tariffs selling into the EU, which has hurt us badly on trade, down $151 Billion. Tariffs are just a Harley excuse.”

Edward Alden, a senior fellow at the Council on Foreign Relations, said the Harley decision undermined the president’s claim that his “America First” trade stance would benefit manufacturing workers.

“If Trump’s trade policies are leading an iconic company like Harley-Davidson to move production out of the United States, then who exactly is benefiting?” Alden said. “This will pose a real challenge to the president’s core claim that his policies will lead companies to build more things in the U.S.”

But with H-D’s announcement, already there are comments from other US companies considering a move of their US manufacturing operations.

Because of the higher taxes and higher wages in the US, this has always been an issue for keeping manufacturing in the US.  With these latest tariffs from the president, it could be the last straw for some US companies to make the move elsewhere.

In Silicon Valley today, major new building is going on 24/7.  But with these new tariffs, that could bring that massive building faze to a screeching halt.

For H-D, the European market is their 2^nd largest market after the US.  Last year, H-D sold 40,000 units in the EU.  Shifting production to its non-US plants will require additional investment overseas and it is expected to take nine to 18 months, this is according to H-D.  But after that short time, and its major loss of jobs, even if the tariffs go away, the damage will be done.

On the White House lawn, Trump had said: “Thank you, Harley-Davidson, for building things in America,” the president said then.  “And I think you’re going to even expand.”

Little did anyone expect that the expansion could be in another country.

Robert Martinez, the international president of the International Association of Machinists and Aerospace Workers, which represents Harley employees in three US plants, said in a statement. “Even before the EU’s announcement, Harley made the decision to close its plant in Kansas City and has manufacturing facilities in India and Brazil. It also announced a future plant in Thailand.”

Initial reaction from the Republicans on Capitol Hill showed the unease with the president’s tactics. “This is further proof of the harm from unilateral tariffs,” said AshLee Strong, a spokeswoman for House Speaker Paul Ryan (R-WI). “The best way to help American workers, consumers, and manufacturers is to open new markets for them, not to raise barriers to our own market.”

Trump has said “trade wars are good and easy to win,” but users of imported steel and aluminum already are feeling the pain of the administration’s policies.

Mid-Continent Nail of Poplar Bluff, Mo., the largest US nail manufacturer, cut 60 jobs on June 15 and plans to lay off an additional 200 workers in a few days, citing plummeting sales following the imposition of Trump’s tariffs on metals. The company said it may not survive past Labor Day if it doesn’t get relief from the tariffs.

Mid-Continent Nail imports from Mexico most of the metal wire it uses to make nails. By driving up the company’s costs, Trump’s tariffs are making it nearly impossible for the 500-worker company to compete with cheap nails from China, Mid Continent's spokesperson Mike Skarich said.

“The Chinese get a pass, and we pay a price,” Skarich said. “Trump ran on jobs and making America great again, but he is making a decision that may help big steel, but it hurts downstream businesses like ours who employ a heck of a lot more people than steel does.”

Sen. Claire McCaskill (D-MO) criticized Commerce Secretary Wilbur Ross last week during a Senate Finance Committee hearing, saying his handling of the product exclusions threatened Mid-Continent’s future.

“They have filed 24 separate tariff exclusion requests, but there will not be enough time for them to potentially save their business,” she said.

This is going to get a lot worse before it gets better……if it even does get better.

Copyright G.Ater  2018

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