Will the U.S. really put a 100 percent tax on small European motorcycles?

Jan 18, 2017

You may have read a report or two in the motorcycle media lately about a proposal to slap a 100 percent import tariff on sub-500 cc European motorcycles in retaliation for European countries’ refusal to allow imports of U.S. beef.

Sounds crazy, right? What does a KTM motocross bike or a Vespa scooter have to do with an international beef over beef?

So we looked into the issue a little more deeply, and while it still is a little crazy, it may not be as ominous as it first appears.

What’s the beef?

This is really an old issue. The crux of the dispute is that the European Union bans the import of U.S. beef grown with certain hormones. In 1998, the World Trade Organization ruled the exclusion was then costing the U.S. producers $116.8 million a year. Tariffs on EU goods were proposed, all of them agricultural in some nature except for small motorcycles and hair clippers. The issue has simmered since and now it’s back in the news because the United States Trade Representative is holding a hearing Feb. 15.

The Motorcycle Industry Council and the American Motorcyclist Association have been paying attention to this issue for obvious reasons. If a 100 percent tariff were imposed on small European motorcycles and nothing else changed, there would be significant repercussions as the prices of some bikes rose overnight.

Aside from hurting the manufacturers, there are also dealers and their employees to be concerned about. So the AMA put out an Action Alert to its members, warning about a possible tariff. Naturally, it was picked up and republished in some corners of the media without a second thought.

But we decided to give it a second thought.

Is the tariff coming?

There are reasons to think the threat is not as imminent as it may sound.

First and foremost, the USTR hearing is being held at the request of beef industry lobbyists to revive these old tariff proposals. (The deadline for comments is Jan. 30.) The beef industry can ask, but there’s no guarantee it will receive.

Supporting that view is an 18-year history of these proposed tariffs on motorcycles not being imposed. Dig into the archives and you can find the AMA reporting on the issue in this article in 1999. The issue was also revived a decade ago, as the AMA noted in its news release this week.

“The same agency tried the same tactic in 2008, but the effort was thwarted when the AMA, the Motorcycle Industry Council and bike manufacturers and retailers rallied motorcyclists against the plan. At that time, the U.S. Trade Representative instead raised the tariff on a variety of European food products,” the AMA stated.

Common sense — what do cows have to do with small motorcycles and scooters? — and political pressure have kept this issue a non-starter for two decades. But… what if it did happen?

Imagine the tariff

Actually, there’s some interesting precedent there. Something similar has happened in the car world. Ever heard of the Chicken Tax? If not, here’s an entertaining explanation by Jason Torchinsky at Jalopnik from a few years ago. In 1963, some European countries taxed American chicken heavily, and the U.S. response was to slap a 25 percent tariff on imported light trucks in an effort to stick it to Volkswagen.

Volkswagen doesn’t sell trucks in the United States any more, but other foreign brands, like Nissan and Toyota, set up shop and built their trucks here to avoid the chicken tax (which sounds a lot like a beef hormone tax on motorcycles).

Would the same thing happen with motorcycles? Would we end up with Italian scooters built in Tennessee or Husqvarna motocrossers built in South Carolina? It’s one possibility, though the smaller volumes might make it harder for companies to pull it off profitably.

Another loophole companies use to get around import tariffs is called a CKD, or “complete knock-down kit.” Vehicles are imported in various states of completeness. They’re said to be “knocked-down” and they are not treated as final, assembled vehicles. It wouldn’t be hard to ship a dirt bike this way and have a dealership tech bolt the engine in the frame, for example. Sure, the dealer prep fee the buyer pays might double, but that’s certainly less than the impact of a 100 percent tax.

No, it still doesn’t make sense

Despite all these reasons why sub-500 cc European motorcycles are not likely to disappear immediately due to the beef wars, we agree the whole issue doesn’t make a lot of sense. While we have no desire to render an opinion on the use of hormones in beef or Europeans’ dining preferences, we don’t see much reason to believe that taxing small motorcycles is going to resolve the dispute.

You do have an opportunity to have your say. As mentioned above, the USTR is accepting public comments until Jan. 30 for the hearing to be held Feb. 15. You can read the background here and comment here if you’re so inclined.