Harley-Davidson's Tariff Crossroads: Can the Iconic Brand Navigate Rising Costs and Uncertainty?
14min read Harley-Davidson’s decision to withdraw its 2025 financial guidance underscores the seismic challenges facing the American motorcycle icon. Rising global tariffs, supply chain disruptions, and a slump in demand have pushed the company into uncharted waters. Here’s why investors should brace for turbulence—and what might still keep the flame alive.
The Tariff Tsunami
The company’s first-quarter 2025 results revealed a stark reality: tariffs are costing Harley up to $175 million annually. The pain stems from two key sources:
1. Steel Imports: Harley sources $50 million in steel annually from Mexico and Canada, now subject to 25% tariffs under U.S. trade policies.
2. Chinese Components: Another $50 million in parts face tariffs as high as 145%, including retaliatory levies tied to Venezuela’s oil trade.
These tariffs, layered atop higher interest rates and weaker consumer spending, have forced Harley to halt production relocations to Thailand—a move that could add further “tariff wrinkles,” as CEO Jochen Zeitz admitted. The cumulative effect? A 23% year-over-year revenue drop to $1.3 billion in Q1 2025, with motorcycle sales plummeting 24% in North America, its core market.
The EV Stumble
Harley’s electric vehicle (EV) ambitions, once a bright spot, now look dim. Its LiveWire unit sold just 33 units in Q1 2025—a 72% decline from the prior year—leading to a $20 million operating loss. Management has frozen further investments in LiveWire beyond a $100 million credit line, citing regulatory hurdles and inadequate charging infrastructure. This retreat raises questions about Harley’s ability to compete in a sector dominated by tech giants and startups.
Leadership and Liquidity: A Mixed Picture
Harley’s $1.9 billion in cash and a 3.8% stock price bounce post-earnings offer fleeting comfort. Yet CEO Zeitz’s proxy battle with shareholders and his plan to step down signal deeper governance concerns. Investors are also wary of Zeitz’s strategy to shift toward online sales and higher-priced motorcycles, which have strained dealer relationships and exacerbated sales declines.
Meanwhile, the financial services division (HDFS) posted a 19% operating income rise, thanks to cost controls. This resilience hints at Harley’s broader liquidity strength—but it’s overshadowed by the motorcycle division’s 51% operating income drop to $160 million.
The Bigger Picture: Tariffs and Trade Wars
The U.S. tariffs aren’t just Harley’s problem—they’re part of a broader geopolitical shift. President Trump’s 2025 policies, which include 25% auto tariffs and retaliatory levies on allies like Canada, have created a “trade war” environment. The European Union’s threat of a 50% tariff on U.S. motorcycles further complicates Harley’s export strategy. Analysts estimate these policies could shave 1.1 percentage points off U.S. GDP growth, worsening the demand environment Harley faces.
Conclusion: Riding into Uncertainty
Harley-Davidson’s outlook hinges on three critical factors:
1. Tariff Relief: A 25% tariff on Canadian/Mexican steel equates to $12.5 million in annual costs alone—and that’s before Chinese components. Without policy shifts or supply chain reengineering, these costs could erode margins further.
2. EV Turnaround: The LiveWire unit’s failure to gain traction in a $20 billion U.S. EV market (per BloombergNEF) signals missed opportunities. Harley may need external partners or a pivot to lower-cost markets to revive this segment.
3. Leadership Stability: Zeitz’s exit and shareholder disputes create uncertainty. A new CEO must balance cost-cutting with dealer relations and innovation—a tightrope walk in a declining market.
For now, Harley’s liquidity and brand legacy buy it time. Yet with motorcycle sales down 21% globally and the stock down 23% year-to-date, investors face a stark choice: bet on a turnaround or brace for more turbulence. The road ahead is long—and the tariffs are only getting steeper.
