American firms will be hit hard by retaliatory tariffs
“LOOK at all these bikers…we love the bikers!” declared the pre-presidential Donald Trump, surveying a crowd of motorcycle-owners gathered by the Lincoln Memorial in Washington, DC, in 2016. Riders of Harley-Davidsons, in particular, have been among Mr Trump’s noisiest supporters since the early days of his campaign. Riders of “hogs” often see themselves as rowdy rebels. Perhaps this is why many have identified with Mr Trump’s disdain for conventional politics.
Alas, the love affair may be heading for trouble. Mr Trump’s trade policies have put Harley-Davidson in a double bind. The company uses a lot of steel and aluminium to make its bikes. Although much of that is domestically sourced, Mr Trump’s tariffs on imports have led to higher prices for locally made metals, too, thus raising costs. And the European Union is poised to impose retaliatory tariffs on a variety of American exports, including motorcycles and whiskey. Harley-Davidson had bet on a continued boom in European sales, which make up about 16% of its total.
The EU’s tariffs on Harleys are just one of several acts of retaliation taken or planned by America’s trade partners, some intended to cause political as much as economic pain. Harley-Davidson is based in Wisconsin, home state of Paul Ryan, the retiring Speaker of the House of Representatives. Kentucky, the turf of Mitch McConnell, the Republicans’ leader in the Senate, distils a lot of bourbon.
Harleys are not the only hogs on the chopping block. American pork producers learned on June 5th that Mexico, their leading export market ($ 1.5bn last year), plans a 20% tariff on a variety of their products. Americans typically disdain shoulder, but Mexicans happily consume the cut in dishes such as tacos al pastor. These tariffs are “potentially devastating” for farmers, says Gregg Hora, president of the Iowa Pork Producers Association. Granjas Carroll, a top producer in Mexico, estimates that prices there may rise by 15% or more, which it worries will drive down consumption.
Mexico’s list of threatened tariffs will bring pain to peddlers of fruit, too. Some 1,300 apple-growers in Washington state, the leading source of exports, sell between 12m and 15m bushels a year to Mexico. Todd Fryhover, president of the Washington Apple Commission, estimates that exports to Mexico were on track to top $ 240m this year. “This new tariff puts that goal in doubt,” he laments.
Dairy farmers are also complaining. Yogurt is among the dozens of American products, from chocolate to orange juice, in Canada’s sights. Mexico is targeting cheese. It is the top destination for American dairy exports; in March, for example, it bought 8,700 tonnes of cheese. Tom Vilsack, a former Secretary of Agriculture who now runs the US Dairy Export Council, a trade body, notes that market instability and a lack of clarity on policy, as well as tariffs, are hitting dairy prices.
The trail of potential harm to companies—both from America’s tariffs and from retaliation by others—also shows how globalisation makes a mockery of attempts to aim tariffs precisely at foreigners. American carmakers and their vendors have strung their supply chains across the Canadian and Mexican borders. Granjas Carroll, a loser from Mexico’s pork levy, is partly owned by WH Group, a giant Chinese food producer.
And of course consumers lose, too. The EU’s proposed tariffs on motorcycles, jeans and whiskey amount to a cruel tax on Hells Angels across Europe. The innocent always suffer.