Call it a tale of two manufacturers. On Monday, Milwaukee-based Harley-Davidson, Inc. announced plans to shift some production of its iconic motorcycles overseas.
Three days later, in a field just 30 miles south of Harley headquarters, Foxconn Technology Group, the Taiwanese company that is the world’s largest contract electronics manufacturer, broke ground on a sprawling $10 billion plant that will produce flat-panel displays.
Donald Trump responded to both moves with characteristic bombast. He decried Harley’s decision as an act of “surrender” and, in a furious Tweet-storm, threatened to punish the company with higher taxes. For Foxconn, he had lavish praise. Trump flew to Mount Pleasant, site of the Foxconn plant, to join the ground-breaking ceremony. Wielding a gold-plated shovel and flanked by House Speaker Paul Ryan, Wisconsin governor Scott Walker and Foxconn chairman Terry Gou, the president extolled the new facility as the “eighth wonder of the world,” and an example of the “exciting story playing out across the country.”
Trump and his aides have sought to portray Foxconn as the poster child for Trump’s America First economic policies while dismissing the move by Harley-Davidson as an aberration. More likely it’s the other way around.
Foxconn’s decision to build a factory in Wisconsin was a one-off, requiring an extraordinary package of tax incentives and other sweeteners worth more than $4 billion. Foxconn promises the plant will eventually create 13,000 jobs with an average salary of $54,000. But Quartz estimates Wisconsin taxpayers are subsidizing Foxconn at a rate of $307,692 for each worker. According to one government analysis, the plant won’t begin to make the state money until 2042.
Meanwhile, Trump’s get-tough trade policies hit Harley-Davidson with a double whammy. The company says Trump’s tariffs on imported steel and aluminum will raise its manufacturing costs by $20 million this year. Tariffs imposed by the European Union in retaliation to Trump’s policies will raise duties on U.S. motorcycles exported to Europe to 31%, up from 6%, adding $45 million to Harley’s costs this year—and as much as $100 million on an annual basis. For Harley, which faces shrinking sales at home and reported net income of $594 million last year, cost increases of that magnitude are almost impossible to swallow. In a financial filing, the company described its decision to shift production as “the only sustainable option to make…motorcycles accessible to customers in the EU and maintain a viable business in Europe.”
And Harley is hardly the only U.S. producer caught in the cross-fire of the escalating trade war. The E.U.’s retaliatory tariffs will penalize $3.2 billion worth of American products, including bourbon, orange juice and playing cards. Wisconsin dairy farmers are worried about retaliatory tariffs from Mexico. Retaliatory tariffs announced by Canada, set to take effect July 1, will hit $12.6 billion of U.S. exports ranging from mustard to motorboats. Chinese tariffs could slash U.S. soybean exports to that country by 65%, costing farmers in Illinois, Iowa, Minnesota and other states as much as $3.3 billion, according to a Purdue University study. General Motors warned Friday that tariffs on imported vehicles being considered by the Trump administration could lead to “a smaller GM” and risked isolating US businesses from the global market.
Wisconsin was a crucial swing state for Trump, but he carried it by only 23,000 votes. So far, his confrontational approach to trade issues hasn’t helped him garner new support. A recent Marquette University Law School poll found that 51% of Wisconsin voters said trade deals have been a “good thing” for the United States, while ony 28% said they were a bad thing. The poll also found that 46% think the state is paying more for the Foxconn plant than it’s worth, while 40% think taxpayers’ investment in the facility will pay off, and that 50% disapprove of Trump’s performance as president while 44% approve.
Trump has famously declared trade wars “good and easy to win.” But if more companies follow Harley’s lead and losses from retaliatory tariffs and investment restrictions mount in swing states like Wisconsin, the danger for Trump is that his trade war will prove his political undoing.
By: Clay Chandler and Eamon Barrett