This comes on the heels of President Trump's decision to impose a new 25% tariff on steel imports from the EU and a 10% tariff on imported aluminum.
As many are aware, President Trump has been threatening to impose a new 20% tariff on all cars imported from the EU, which would hit manufacturers like Fiat Chrysler, Volkswagen, Mercedes-Benz (Daimler), BMW, and Audi, among others. The president is looking for the EU to drop duties on U.S cars, characterizing those tariffs as unfair trade practices.
With the EU not budging on its new tariffs, it now seems likely that the next retaliatory move will be the implementation of the American tariff on EU car manufacturers. Whether the president will stick with that 20% figure or bump it upward, back toward the original 25% level, is less certain.
As for HOG, the company says that it does not plan to raise prices to offset the higher costs. Doing so, it believes, would have longer-term ramifications that could leave a lasting negative impact on its business. So, in the near-term, HOG will bear the brunt of the new tariffs. The company estimates that the tariffs will have an impact of $90-$100 mln in costs on an annualized basis.
The company does have a plan in place, though, to at least ease the tariff burden. HOG will be shifting its production of motorcycles destined for the EU from U.S. facilities to international facilities. Ramping up production at these facilities will, of course, require new investments and may take 9-18 months to fully complete.
Not surprisingly, the stock is sinking lower with this news, currently down over 5%. There is a key support level at $40 -- an area traders and investors should monitor closely. All in all, the situation obviously isn't ideal for HOG, but if sales in the U.S. -- by far its largest market -- can rebound and if it can continue to grow in other un-tapped international markets, then perhaps the impact can be mitigated.