Shares of Harley-Davidson (HOG) skidded close to a two-year low on Tuesday after it warned of a potentially significant hit to sales if it gets caught in the middle of a trade war.
European Commission President Jean-Claude Juncker named Harley-Davidson motorcycles as a likely target for retaliation by the European Union if President Trump follows through on his plan to impose tariffs of 25% on U.S. steel imports and 10% on aluminum.
On the stock market today, Harley shares closed down 2% but had come off session lows.
Harley is hardly the only company in the line of fire. Like Harley, Boeing (BA) stands to face both higher metals costs due to Trump tariffs and, of greater concern, potential harm on the sales front if governments take out their frustrations with Trump on Boeing.
Boeing shares slipped 1.1% on Tuesday, while European rival Airbus (EADSY) rose 0.9%.
Meanwhile, steel stocks bounced back after a bout of selling early Tuesday to turn in mixed results. U.S. Steel (X) was off 0.5% and Steel Dynamics (STLD) 0.7%, Nucor (NUE) 0.1% while AK Steel (AKS) rose 0.7%.
Financial markets appear to be in a holding pattern as investors try to figure out what Trump will do.
Harley-Davidson is seen as an especially juicy target for reprisals because it has a factory in House Speaker Paul Ryan’s Wisconsin district, though the EU had the motorcycle maker in its sights back in 2003, before President George W. Bush lifted steel tariffs after 18 months to avert trade repercussions. Ryan hardly had an international profile back then.
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There’s some logic in ramping up the pressure on Ryan. The pro-trade Republican already has come out against the Trump tariffs, and GOP members of Congress are quietly discussing what they might do to block Trump if he proceeds. Realistically, mustering a veto-proof majority to stop Trump might be impossible. But U.S. trade partners may want to drive a wedge between Trump and Congress so that he has less political capital to strike back once they retaliate.
Europe accounts for about 16% of Harley sales, but the EU may not be the only country looking at the Milwaukee-based company as a potent target. Canadian trade experts also are discussing a likelihood that Ottawa would target Harley-Davidson if Trump won’t exempt its Nafta partner from steel tariffs.
Canada is the biggest exporter of steel to the U.S., yet it’s also easily the biggest importer of steel from the U.S. Trump has tweeted that Mexico and Canada can escape his tariffs only if they sign on to a “new & fair Nafta agreement,” but talks on revamping the deal haven’t progressed very far.
Canada makes up about 5% of Harley-Davidson’s sales, while Mexico accounts for a smaller fraction. Mexico also is reportedly looking for politically sensitive ways to undercut support for Trump’s tariffs, and it would be no surprise if it looks to Milwaukee.
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