President Trump’s top economist defended the White House’s increasingly aggressive trade policies Tuesday, calling Harley-Davidson’s decision to move some operations overseas an exception to a broader trend of renewed corporate investment within the United States.
Kevin Hassett, chairman of the Council of Economic Advisers, said foreign direct investment on American soil “has skyrocketed” in the year’s first quarter, a trend he attributed to a cut in the corporate tax rate that Trump signed into law last year. “There’s a massive amount of activity coming home,” Hassett said at a Washington Post event on tax reform. “Harley-Davidson is an interesting story, but if you look at the data, the opposite is happening.”
The Wisconsin motorcycle manufacturer is moving some assembly overseas to avoid paying tariffs imposed by the European Union, and the announcement prompted a furious response from Trump on Twitter. The E.U. tariffs came in response to Trump's tariffs on steel and aluminum imports, and Harley's move is a high-profile example of the type of economic damage that many economists warn a trade war would inflict.
At The Post's event Tuesday, Rep. Kevin Brady (R-Tex.) echoed fears about tariffs hurting U.S. industry. “I do think some of the trade issues are creating uncertainty back home,” he said. “Certainly in Texas, we’re seeing this with local manufacturing in the most part, as well as our energy industry.”
Trump has long complained that the global trade system is tilted against the United States, and he has promised to change those rules, threatening countries with far-reaching trade levies if they don't grant concessions. While some countries have acceded to some of Trump's demands, other major trading partners — including the E.U., Canada and Mexico — have responded by issuing retaliatory tariffs on the United States.
Hassett conceded there could be turmoil as Trump works to reorder global trade, but he defended the moves as creating a “more reciprocal” global commerce environment. “Uncertainty while you're trying to accomplish a certain objective is something that can roil markets,” he said.
Harley-Davidson’s reveal was followed by deep slides on Wall Street. Harley shares dropped nearly 6 percent on Monday, while the Dow Jones industrial average plummeted. The tumble came amid fears about the effects of a trade war, with U.S. companies concerned they'll lose access to foreign markets and have to pay more for raw materials.
Former White House economic adviser Gary Cohn, who resigned shortly after Trump announced the tariffs, cautioned earlier this month that a trade war could wipe out the economic gains of the GOP tax law.
A Federal Reserve survey of American firms in April identified “robust” job growth nationwide but also worry that trade conflicts could hurt that progress. “Businesses generally anticipate further price increases in the months ahead, particularly for steel and building materials,” according to the report, which summarized responses from business leaders across industries.