Will Harley-Davidson Motorcycles Soon be Made in China?

Famed American Motorcycle manufacturer Harley-Davidson has announced plans to open new production facilities outside of the United States in attempts to skirt the European Union’s sanctions on the classic brand. It is expected that motorcycles destined for the EU will now be made either in Canada, south east Asia or in Europe itself as a result.

Donald Trump has already responded furiously, admonishing the company to “be patient” as his trade war progresses.

 

 

While Donald Trump has championed the cause of making the US a more business friendly environment in respect of lowering tax and regulatory burdens, his tariff war is already undoing whatever good might have come from his domestic reforms. But while Harley-Davidson’s moving of some production facilities out of the US was proximately motivated by the European Union’s retaliatory tariffs which specifically targeted their motorcycle exports, as Trump continues to defy the global trend which has seen more foreign businesses invited and welcomed to China, legacy American brands including Harley-Davidson could end up moving manufacturing facilities into the world’s single largest national market – China, as a result.

As Chinese consumers become increasingly affluent, major brands from throughout the world are looking for inroads into China. Earlier this year when Mercedes-Benz quoted a secessionist agitator in an advertisement targeting Chinese consumers, they quickly apologised and vowed to pay closer attention to Chinese sentiment in the future.

 

 

This event demonstrated that major foreign brands not only covet but value the Chinese market. As China is currently conducting a policy of opening its large domestic market to more foreign imports and capital inflow, Trump’s trade war is isolating American companies from the opportunities that many others are already beginning to seize upon.

That being said, while in the past US manufacturers would produce goods in China and then import them back to America, now it is China which is equally attractive for its modern and efficient production capabilities as it is for its consumer base. Therefore, in the future one could see Harley-Davidson, Cadillac or Ford producing motorcycles and cars in China that are specifically designed for the Chinese market rather than for export. American automaker General Motors already has facilities in China and according to current global consumption trends and China’s policy of economic openness, one could see American companies accelerate their route into the China at an ever more rapid rate. This reality exposes the overall sham of Trump’s threat to punitively tax Harley-Davidson in retribution for moving some production facilities abroad. The company like many others can simply produce goods in the US intended for the domestic market and produce items designed for export outside of the US.

Rather than engaging in dialogue with China on the win-win model favoured by Beijing, Trump has instead decided to plunge into a zero-sum tariff war that whose first casualty is Haley-Davidson reconsidering the long term viability of producing in the US. The long term trajectory of such a reality is that many American companies will come to see the US market as volatile as a production base, less because of taxation than because of Trump’s penchant for long term trade wars with some of the largest markets in the world whether the European Union and China.

Because of this, Trump is doing a favour to everyone except his own country by forcing companies into relocating their factories abroad – something that Trump decried during his campaign. By contrast, a win-win model would allow for American and Chinese goods to flow more freely into each nation, all the while encouraging the inflow of investment capital on a two-way street between the world’s two leading economies.

 

 

Inversely, if the trends that Donald Trump is currently setting continue into the future, one might find that the next time one shops for a Harley-Davidson, the American classic might actually be made in China.

Comments are closed.