By Keith Nobles

I see people saying to effect, “Reagan put tariffs on the Japanese.”

Let us look at that.

Reagan placed tariffs on what are deemed ‘heavyweight’ motorcycles imported into the United States. Generally these are motorcycles for which the engine is 1000 cc’s (61 cubic inches) or larger.

Here is the backstory to this: William Harley and the Davidson brothers started building motorcycles in 1903. It was a crowded market but they did well. The crowded American motorcycle market thinned out when Henry Ford began to sell cars that were as inexpensive as large motorcycles – the Model T changed the American motorcycle market from transportation to sport and recreation. The American motorcycle industry thinned out even more significantly with the advent of the Depression – Harley-Davidson and Indian were the only American motorcycle manufacturers that were able to survive the Depression. Harley-Davidson survived primarily due to the introduction of the knucklehead in 1936, at the time the knucklehead was perhaps the best motorcycle in the world that the average fellow could afford to buy.

Indian went out of business after World War II as result of a disastrous product and marketing decision. Indian made the decision to develop and build motorcycles that would compete with the smaller displacement, better handling British imports that were becoming more popular in the United States rather than competing against their historical rival Harley-Davidson. The result of this decision was Indian alienating their core market while failing to compete with the British imports in terms of sales – this led to bankruptcy and the end of Indian. The market wanted to make the choice of Indian vs Harley-Davidson, not Indian vs Triumph.

This left Harley-Davidson as the sole American motorcycle manufacturer.

Eventually Harley and the Davidson brothers passed on and left the company to their children, who unfortunately spent decades bleeding out the profits. For nearly fifty years Harley-Davidson made updates to the 1936 knucklehead design without developing anything legitimately new. Harley-Davidson declined to update equipment or manufacturing methods and became renown for poor quality. On top of this the company was notorious for failing to honor their warranties. Even after AMF purchased the company in the 1960’s they continued many of the poor practices the descendants of the Davidson’s had put in place. AMF continued to bleed the value of the brand without investing in updated products or manufacturing methods.

By the early 1980’s it was clear that Harley-Davidson had no future in the market with their existing product lineup. The Japanese had already driven the British manufacturers into bankruptcy and BMW and the Japanese were now building motorcycles that were faster, required much less maintenance, were much more reliable and cost less than comparable models from Harley-Davidson. AMF was unwilling to invest the necessary capital to develop new products though the engineers at Harley-Davidson had repeatedly produced modern designs that never saw the light of day. In this environment the engineers at Harley-Davidson were able to raise sufficient capital from investors to purchase the company from AMF – which at that point was more than willing to offload the brand.

The Harley-Davidson engineers were confident that they could design, build and sell modern motorcycles that would be viable in the market. In this light they approached the Reagan administration and ask for three years of breathing room for the new products to be introduced into the market. The Reagan administration agreed to three years of tariffs levied against ‘heavyweight’ motorcycles in order that Harley-Davidson acquire the necessary breathing room to re-tool and introduce new products into the market. The tariff was a step-down model whereby the penalty on imports was reduced each year – in other words Harley-Davidson had to improve each year for the tariff to be effective.

One can agree or disagree with the Reagan administration on this tariff but there is no disagreement that it has no parallel to the Trump tariffs.

2 COMMENTS