Tuesday, March 06, 2018

How much could European tariffs hurt U.S.? Ky.'s bourbon and auto plants are a case study, but so is aluminum

The European Union has threatened to retaliate with tariffs on American-made products like Harley-Davidsons, bourbon and Levi blue jeans if President Trump proceeds with his plan to place tariffs on steel and aluminum imports.

Jean-Claude Juncker, president of the European Commission, "said the plans to tax the American goods, produced in the home states of key Republican leaders, had not yet been finalized, but amounted to treating them 'the same way' that European products would be handled if the metals tariffs go through," Melissa Eddy and Chad Bray report for The New York Times.

A tariff against Levis would impact few American jobs, since most Levis are made in Thailand. Levis are only mad"e in America by one factory in Greensboro, North Carolina.

Harley-Davidson has four factories in the U.S. and another four in Australia, Brazil, India and Thailand. Shifting production to these foreign factories could help the company skirt tariffs. "Europe also accounted for 16 percent of Harley's worldwide motorcycle sales last year. . . making it the second biggest market behind only the U.S.," Rich Duprey reports for The Motley Fool. Many of Harley's new models are Softails, a line popular in Europe than in the U.S. Because the company is investing so heavily in those models, losing sales because of higher tariffs would hurt the company quite a bit. The bottom line, Duprey writes, is that Harley-Davidson might survive the tariffs, "but it would also take on heavy damage at a time it can ill afford to do so."

Tariffs on bourbon would hurt Kentucky, home of Senate Majority Leader Mitch McConnell. The drink has become more popular internationally, Mitch Herckis reports for Route Fifty. A 2017 study at the University of Louisville said the bourbon industry brought $190 million in revenue to the state and local economies in 2016. It said "The industry is responsible for between 15,000 and 17,500 jobs in the state, annual payroll of nearly $800 million, and total economic output of $8.5 billion" and added 2,000 jobs in the past two years.

Kentucky is also a leader in the automobile industry, which uses imported aluminum and steel, but is also the leading U.S. producer of aluminum and home to "a mostly idle aluminum plant [that] has become the poster child for President Trump’s decision," Chris Otts reports for Louisville's WDRB-TV. "Thus the Bluegrass State, which voted overwhelmingly for Trump in 2016, now becomes a test case for his protectionist policies. . . . Chicago-based Century Aluminum Inc., which has two plants in Kentucky, has been among the most vocal supporters of Trump’s action. Once Trump finalizes the tariffs, Century Aluminum will invest $100 million in its aluminum smelter in Hawesville, Ky., and double the plant’s employment by adding about 300 jobs, said Jesse Gary, Century Aluminum’s executive vice president, in an interview Monday."

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