Tag: Bourbon

Harley Davidson (HOG) finds itself in a well-known situation as the European Union (EU) prepares to impose tariffs on a wide range of products, including “boats, bourbon, and motorbikes,” in retaliation for U.S. tariffs on steel and aluminum. The 27-member bloc has unveiled countermeasures targeting U.S. goods worth €26 billion ($28.3 billion), which are set to be partially implemented on April 1st and fully by April 13th. This move will reactivate “rebalancing measures” that were first initiated in 2018 and 2020 to counteract the initial wave of Trump steel tariffs affecting items like motorbikes and whiskey.

This is a familiar challenge for motorcycle manufacturer Harley Davidson, which experienced a decline in its stock in 2018 when the EU imposed tariffs in response to the trade conflict initiated by Donald Trump. As the EU raised tariffs on Harley-Davidson motorcycles from 6% to 31%, the company expressed concerns that the average Harley bike exported from the U.S. to the EU would see a price increase of about $2,200, translating to a $90 million to $100 million cost impact over the course of a year.

Déjà Vu for HOG

In a recent filing, HOG acknowledged that it would need to confront similar challenges again. Citing past instances of the EU’s incremental rebalancing tariffs implemented back in 2018, the company noted in its annual report dated February 26th that it anticipated additional foreign tariffs, including those from the EU, as a reaction to the U.S. steel and aluminum tariffs.

If the EU reinstates previously suspended tariffs, it will result in HOG motorcycles imported into the region facing a steep 56% tariff, significantly escalating prices.

Harley’s response during the last round of tariff increases was straightforward: shift production overseas. “To mitigate the substantial cost burden of these tariffs long-term, Harley-Davidson plans to move motorcycle production for EU markets from the U.S. to its international plants to evade tariff costs,” the company stated in June 2018.

This time, however, the escalation of the trade conflict complicates matters. Additionally, the range of tariffs will likely increase the costs of components and materials needed for manufacturing the company’s motorcycles and other products, further squeezing profit margins.

The U.S. first imposed tariffs on imported steel and aluminum from the EU in 2018. In response, the EU enacted incremental rebalancing tariffs of 25% on specific products coming from the U.S., including non-electric motorcycles. Starting in April 2021, the EU’s 25% incremental tariff began applying to the company’s motorcycles imported from its U.S. and Thailand manufacturing facilities. On October 21, 2021, the U.S. and EU reached an agreement to suspend these tariffs, with the EU’s suspension of its incremental tariffs set to expire by the end of March this year.

Is HOG a Good Stock to Buy?

Wall Street currently holds a Moderate Buy consensus rating for HOG stock, which reflects four Buys, five Holds, and one Sell recommendation. The average target price for HOG stands at $30.13, suggesting a potential upside of approximately 16% from current trading levels.

Explore more HOG analyst ratings

If you have any questions or comments regarding the article, please reach out at [email protected]