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A blog by Leon Oudejans

Dealmaker-in-Chief cuts deal to annihilate American Business (VF)

27 June 2018


Subtitle: “This is not how those tariffs were supposed to work out.”

“When Donald Trump was running for president, he spent an incalculable number of hours grousing about how America was getting taken for a ride, and Uncle Don was the only one who could put a stop to it. “We need a leader that wrote The Art of the Deal,” he said while announcing his candidacy in 2015. He elaborated during a 2016 Republican debate, falsely insisting, “I’ve done very well over the years through negotiation.” Of particular importance to the would-be president was trade, on which he was fond of proclaiming America was “getting killed.” In addition to trashing agreements like the Trans Pacific Partnership and NAFTA, and promising to use his aforementioned deal-making prowess to strike new, better deals, Trump vowed to slap indiscriminate tariffs on countries around the world, in order to show everyone who’s boss. Seventeen months into the job, how’s that working out? Not great!

On Monday, motorcycle manufacturer Harley-Davidson announced that it will shift some production of its bikes overseas in order to avoid the tariffs imposed by the European Union in response to Trump’s steel and aluminum levies. In a filing, the company—which Trump has previously touted as a “true American icon”—estimated that tariffs on its products would increase the cost of every motorcycle exported from the U.S. to the European bloc by $2,200. “Harley-Davidson believes the tremendous cost increase, if passed on to its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses,” the Wisconsin-based company wrote. “Increasing international production to alleviate the E.U. tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the E.U. and maintain a viable business in Europe.”

Unsurprisingly, Wisconsin’s Paul Ryan was irked about the news, saying in a statement that “this is further proof of the harm from unilateral tariffs.” Chad Bown, a senior fellow at the Peterson Institute for International Economics, told The New York Times that other companies will likely take a page from Harley-Davidson’s playbook as they deal with the one-two punch of higher production costs on raw materials and a tax on exporting to Europe. “I think we can expect to see this same kind of activity every time that President Trump tries to impose new tariffs,” Bown said. Later in the day, Trump tweeted that he couldn’t believe a company would make business decisions based on factors that would impact their bottom line—a move he characterized as “waving the White Flag.” But as it turns out, Harley isn’t the only U.S. company getting dinged by the Dealmaker-in-Chief’s “good” and “easy to win” trade war:

  • Mid Continent Nail Corporation, the largest producer of nails in the country, said last week that it would most likely be forced to lay off half of its employees, and may go out of business thanks to the increased cost of the steel it imports from Mexico;
  • American whiskey makers are worried the E.U.’s retaliatory 25 percent duty on whiskey will obliterate its export business, with Scott Harris, a founder of Catoctin Creek Distillery, telling the Times, “We are just launching into the European market now in a big way, and . . . we’re probably going to see all of our European sales now come to a screeching halt”;
  • Annie Tselikis, executive director of the Maine Lobster Dealers’ Association, expects a major impact on business and jobs from the 25 percent tariff on American lobster set to go into effect next month. Ironically, the measure could help Canada’s lobster market—China reportedly buys 15 to 20 percent of American lobster exports, and Canadian companies won’t face the same tax when selling to Beijing;
  • Cranberry and peanut farmers are expected to take a hit from the E.U.’s tariffs, and given the fact that the U.S. and China are the biggest exporters of peanut butter in the world, the tariff on the U.S. product will probably give China an edge;
  • Nicholas Lardy, a senior fellow at the Peterson Institute, has predicted that “qualitative” measures taken to retaliate by the Chinese could involve U.S. companies facing “increased inspections, further delays of regulatory approvals, and an uptick in nationalist sentiment with a goal to get Chinese consumers to shun U.S. products,” meaning Apple’s $40 billion iPhone market in China “could quickly collapse”;

Small potatoes, you say? Fear not—there’s still plenty of opportunity for foreign nations to pulverize American companies. China’s president, Xi Jinping, who is currently engaged in his own special trade war with Trump, told a group of American and European multinational chief executives that he does not plan to back down in the face of the U.S. president’s actions, saying, “In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek. In our culture we punch back.” And speaking of getting punched in the face, the Dow fell nearly 500 points today before closing the day down 328.09. No, it’s not really fair to tie the rise and fall of the stock market to the president . . . except for when it totally is.”



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