The iconic motorcycle company Harley-Davidson is running out of options on how to respond to a mix of declining sales and potentially devastating tariffs, Jaime Katz, senior equity analyst at Morningstar, told CNBC. She said moving some of its operations overseas may be the logical solution.
“In order to fail to alienate their consumers overseas, keeping that price steady and bringing good innovative products that are manufactured at a competitive price is part of that equation," Katz said Tuesday on "Closing Bell."
On Monday, the Milwaukee-based motorcycle company announced it was moving some of its production overseas in order to avoid the EU's retaliatory tariffs.
The European Union has said it will implement tariffs — up to 31 percent from 6 percent — on goods imported from the U.S. in response to President Donald Trump's steel and aluminum tariffs.
That means about $2,200 would be tacked on to each Harley-Davidson price tag in Europe. The bikes can cost as much as $40,000 — a price point that is already out of reach for many.
In a U.S. Securities and Exchange Commission filing on Monday, the company estimated that the current trade dispute will cost them between $90 million and $100 million this year.
Shares of Harley-Davidson dropped after the news.
Trump quickly responded, saying the move overseas was "an excuse" and pointed out that the company said it would move operations to Thailand in May 2017, long before he announced his tariffs.
"I don’t like that, because I’ve been very good to Harley-Davidson," Trump said at a press conference on Tuesday.
Earlier that same day, Trump said in a tweet, "A Harley-Davidson should never be built in another country-never!"
“I think the people that ride Harleys are not happy with Harley-Davidson," Trump said at the press conference, implying that sales of the iconic American brand have declined because the company has taken up shop abroad.
But, the company has struggled in recent years to attract American riders, since its core demographic, baby boomers, has been aging out. Harley-Davidson motorcycles are no longer considered cool by many young people. And the prices are too high for others.
In an effort to remain relevant, Harley has set its sights on international markets, including parts of Europe and Asia. In 2017, Harley sold nearly 40,000 motorcycles, or 16 percent of its overall sales, in Europe — its biggest market outside of the U.S.
The company also has manufacturing plants in Brazil, India and Australia.