Wisconsin bracing for retaliation tariffs on Harley-Davidson and agricultural products

Harley-Davidson motorcycles, dairy products, ginseng, cranberries and other Wisconsin goods are likely to feel the sting of retaliation from steep tariffs on foreign metals announced Thursday by the White House.

Commerce Secretary Wilbur Ross said Canada, Mexico and the European Union would be subject to a 25 percent tariff on steel and a 10 percent tariff on aluminum beginning at midnight. Other countries, including Argentina and Brazil, agreed to limit metal exports.

"The president’s overwhelming objective is to reduce our trade deficit," Ross said. "We believe that this combined package achieves the original objectives that we had set out, which was mainly to constrict the import of steel and aluminum."

European trade officials have previously threatened to respond to Trump's move with duties on U.S.-made motorcycles, orange juice and bourbon, among other things.

French Finance Minister Bruno Le Maire said Wednesday that the European response to increased tariffs would be “united and firm.”

Wisconsin could be hard hit, as the state is the world’s largest exporter of ginseng and cranberries, and it’s among the top exporters of dairy products.

Milwaukee-based Harley-Davidson Inc. could feel the pinch in both the rising costs of steel and aluminum, and in higher prices of its motorcycles sold outside the U.S.

"We support free and fair trade and hope for a quick resolution to this issue. We believe import tariffs on steel and aluminum will drive up costs for all products made with these raw materials, regardless of their origin," Harley said Thursday.

"We are currently evaluating our options for managing anticipated cost increases following today’s announcement. Additionally, we believe a punitive, retaliatory tariff on Harley-Davidson motorcycles in other major markets would have a significant impact on our sales, our dealers, our suppliers and our customers in those markets," the company said.

This wouldn’t be the first time that Harley, the world’s largest manufacturer of heavyweight motorcycles, has faced tariffs in trade disputes. The EU threatened tariffs on its bikes in 2003.

Harley plans to open a motorcycle assembly plant in Thailand this summer, as the tariff on motorcycles assembled in the U.S. is about 60 percent in Thailand, according to the company.

Trouble brewing

The steel and aluminum tariffs could raise prices for a plethora of other Wisconsin-made goods, from beer to green beans, that use metal for product containers.

“These tariffs are a new $347 million tax on the U.S. beer industry," said Jim McGreevy, president of the Washington, D.C.-based Beer Institute.

"Over the long run, these tariffs will drive aluminum prices higher globally, increasing the cost of beer production for all brewers. The tariffs are already having an immediate and disproportionate impact on American brewers and American jobs."

The beer makers, and many others, say the aluminum they use should be removed from the proposed tariffs and quotas.

"Aluminum used to make beer cans is not a national security threat," McGreevy said.

Wisconsin is one of the nation’s leading producers of canned vegetables. And, like the brewers, the vegetable canneries import a substantial amount of metal.

“We are right with the aluminum (bottle and can) guys on this and are very concerned,” said Nick George, president of the Midwest Food Processors Association, based in Madison.

Wisconsin, Minnesota and Illinois combined produce nearly half of the nation’s processed vegetables, with a wholesale value of roughly $2 billion.

The tariffs “definitely could raise prices” for consumers, George said.

“This tax will hurt,” he said.

The U.S. ships more than 95 million pounds of cranberries a year to countries in the European Union.

Nearly 40 percent of the crop is exported, and in some years, Wisconsin has accounted for more than half the world's supply of cranberries.

For cranberry growers, the threat of tariffs in the EU's 28 countries comes at an especially bad time, with growers awash in too much fruit and low prices.

It "would significantly hinder our ability to compete in these markets," said Tom Lochner, executive director of the Wisconsin State Cranberry Growers Association.

"Any potential tariffs on cranberries are concerning to us," he said.

Makers of construction and agricultural equipment are bracing for higher costs, too.

Under the threat of tariffs, some steel prices have increased as much as 40 percent, said Dennis Slater, president of the Association of Equipment Manufacturers, a Milwaukee-based trade group that represents construction and farm equipment companies.

It’s hard for equipment manufacturers that use a lot of metal to pass on these higher costs to customers in a global marketplace, according to Slater.

“We will be competing against countries that don’t face the same tariffs,” he said.

Down on the farm

Agricultural equipment makers could also be harmed by a drop in farm income if Europe, China, Mexico and Canada turn elsewhere for corn, soybeans and other commodities.

"Moreover, tariffs and quotas will wipe out the positive economic benefits of last year’s tax reform," Slater said.

Mexico says it will answer tariffs on steel and aluminum with duties of its own on a variety of U.S. products including pork bellies, apples, grapes, cheeses and flat steel, among other things.

The European Union and China have threatened tariffs on U.S. agricultural commodities.

China is the biggest consumer of U.S. soybeans.

"When China says it will start buying from Brazil, that sends shock waves through U.S. grain farmers," said Steven Deller, an agricultural economist with the University of

Wisconsin Extension in Madison.

"If Canada and Mexico decide to retaliate and put trade barriers on agricultural goods, then we are in a world of hurt because Wisconsin’s biggest trading partners are Canada and Mexico," Deller said.

About 90 percent of Wisconsin milk is turned into cheese, and about 90 percent of Wisconsin cheese is sold outside the state’s borders.

Nearly all of the ginseng root exported from the U.S. comes from central Wisconsin. Two out of every three rows of soybeans from Wisconsin are sent to other countries.

Tariffs "are a significant concern," said Jim Holte, president of Wisconsin Farm Bureau Federation.

“I would think that most farmers would take this as a piece of bad news that’s going to be somewhat of a challenge for them," Holte said.

Wisconsin lost 500 dairy farms in 2017, and more than 150 have quit milking cows so far this year, putting the total number of milk-cow herds at around 7,600 — down 20 percent from five years ago.

RELATED: As dairy crisis crushes farmers, Wisconsin's rural identity in jeopardy

Nationwide, dairy farmers have been pummeled by more than three years of falling income and rising costs.

It's a bad time for a trade war, according to Darin Von Ruden, president of Wisconsin Farmers Union.

Without access to foreign markets, Von Ruden said, farmers will continue to see prices for their products fall.

Trump's negotiating tactics are creating tremendous uncertainty with trading partners, according to Deller.

"Some people would argue that it's working because it's throwing our partners a curve ball and they are not sure how to respond. But the downside is the business community hates uncertainty. And if businesses don't know what's going on, they aren't going to be making long-term investments," Deller said.

Some Republicans on Capitol Hill don't support the tariffs against Europe, Canada and Mexico.

“I disagree with this decision. Instead of addressing the real problems in the international trade of these products, today’s action targets America’s allies when we should be working with them to address the unfair trading practices of countries like China," House Speaker Paul Ryan, R-Wis., said in a statement.

"There are better ways to help American workers and consumers. I intend to keep working with the president on those better options," Ryan said.

USA Today contributed to this report.