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The ongoing trade war is damaging some of Americans’ favorite brands, with General Motors (GM) warning Friday that tariffs could lead to a “smaller GM.”
In response to the Trump administration’s tariffs on steel and aluminum imports, Mexico, the EU and Canada have all imposed duties on U.S. products. Earlier this month, Mexico imposed tariffs on $3 billion worth of pork, apples and cheese. Last week, the EU raised taxes on $3.4 billion worth of U.S. imports, including classically “American” items like bourbon, blue jeans and motorcycles. Canada’s tariffs on $16.6 billion of U.S. products like ketchup, strawberry jam and toilet paper go into effect on July 1.
On Monday, iconic “made in America” Harley-Davidson (HOG) announced that it is moving some of its production abroad over the next 9 to 18 months — to countries like Brazil, India and Australia. In a regulatory filing, the company said its taxes have increased from 6% to 31% for bikes bound for Europe. This translates to an additional $2,200 per motorcycle. So that the cost is not passed onto the consumer, Harley Davidson will eat the additional cost, which the company estimates to be between $90 million and $100 million annually.
While Harley isn’t planning to raise prices for customers, other brands are passing some of the cost onto patrons. Brown-Forman (BF-A, BF-B) said European consumers should expect the price of a 700 ml bottle of Jack Daniel’s or Woodford Reserve whiskey to increase by 10% over the next few months.
Missouri-based Mid-Continent Nail Corporation, the largest nail manufacturer in the U.S., said it has laid off 12% of its workforce because of the tariff on steel imports from Mexico and Canada. Mid-Continent relies on imported Mexican steel to create nails in the U.S. The company, which has been around for over three decades, saw sales drop by 50% in two weeks after the imposed duty forced it to raise prices. A spokesman told CNN the company is “on the brink of extinction” unless the Commerce Department gives it an exemption.
Car companies may be hurt the most
On May 23, Commerce Secretary Wilbur Ross started an investigation of vehicle and auto part imports. Last Friday, Trump tweeted about imposing a 20% tariff on vehicles and auto parts imported from the EU. Shares of both domestic and European automakers, including General Motors, Ford (F), Volkswagen, Daimler, BMW, Ferrari, and Fiat Chrysler fell after Trump took to Twitter, even without the tariffs taking effect.
The deadline for automakers and suppliers to submit comments to the Commerce Department was originally set for June 22, but it was extended to June 29 — and a slew of automakers are rushing to submit their thoughts. The department received over 2,500 comments. In a statement to Yahoo Finance, Secretary Ross said, “The purpose of the comment period and of the public hearing scheduled for July 19th and 20th is to make sure that all stakeholders’ views are heard, both pro and con. That will enable us to make our best informed recommendation to the President.”