Why More Businesses Plan to Move to Europe in Response to #Tariffs

The recent introduction of tariffs by the US government prompted a response from the European Union. New tariffs were introduced as a retaliatory action against US products, causing those products to be less competitive in the European market. The move could be the start of a bigger trade war with the United States, especially since the Trump administration is showing no sign of revising its policy. In fact, the US government is planning to introduce more tariffs in the near future.

At the same time, the EU is in the process of negotiating economic regulations with the UK as part of the Brexit negotiations. These future regulations will also have a big impact on European economy as well as how European companies – and international businesses based in the EU – can operate and interact with UK-based corporations. The negotiation and tariffs are attracting more companies from around the world, particularly from the UK and US, to move to Europe.

A Logical Decision

For companies like Harley-Davidson, relocating to Europe and Asian countries is more than just about avoiding tariffs. The US manufacturing industry isn’t at its most competitive at the moment, which is why moving production lines abroad is a logical decision to make. Thailand and Vietnam are notoriously efficient while having production facilities in Europe simply means getting much closer to the consumers.

The move also acts as a cost-cutting measure. For starters, companies based in Europe can avoid import tax on goods like US motorcycles and products that are now the subjects of tariffs. This is more than enough incentive for companies to relocate to Europe. There are also a lot of programs designed to help businesses invest more in certain European countries, reducing the required initial investment even further.

At the same time, getting closer to consumers means substantially reducing shipping and handling costs. Products can be shipped to dealers – or direct to customers – faster and in a more efficient way. Europe has one of the best distribution lines in the world, so companies can take advantage of a comprehensive distribution channel no matter where they are in the EU.

It is a logical decision indeed. For companies like Harley-Davidson, moving their manufacturing to Europe or Asian countries is a necessary move to make. According to an announcement made by Harley-Davidson, the newly-introduced tariffs increase the average price of Harley motorcycles by a staggering $2,200 per motorcycle. Manufacturing in Europe is a way to maintain HD’s competitive advantage.

Tech Companies on the Move

The retaliatory tariffs are mainly designed to target tangible goods such as whiskey and motorcycles, but that doesn’t mean only manufacturing companies are interested in moving to Europe. The series of policies introduced by the Trump administration – including tariffs against allies – are also causing companies in the tech and service industries to consider moving to Europe for its better, more stable business climate. The added uncertainties affecting the US and global markets are not ideal for new start-ups trying to raise capital and penetrate markets.

This is a trend that follows the big influx of venture capitalists and investors that are now based in Europe and UK. New funds from the Middle East and different European countries are funding businesses around the world, especially innovative start-ups that focus on technological solutions. The UK, in particular, is showing signs of becoming the next tech capital of the world, with European countries like Germany and France following closely.

In a recent study, researchers found that London is where most Artificial Intelligence (AI) research companies are based today. This makes the city known as the AI capital of the world, attracting more investors, experts, and industry leaders than ever. With this type of clustering – where start-ups or companies in the same field are working from a particular area or city – advancements can be made at a much faster rate.

Challenges to Come

The sudden influx of companies moving to Europe and UK presents a series of challenges for countries in the region. While the influx of new investments is great for the EU, there are a number of challenges that need to be solved before the ideal economic climate can be created. At the top of that list, there’s the challenge of setting up manufacturing lines, factories, workshops, and offices fast enough to accommodate the stream of new companies moving to Europe.

For this, construction companies have great solutions. Temporary buildings, erected to be used for a short period of time, provides companies with a way to start their operations in Europe immediately. The temporary buildings are more suited for workshops and factories, but there are other types of businesses that use this type of structure too. The structure itself can be used for up to three years; even better, it is pre-fabricated and relocatable, making this type of temporary structure perfect for businesses that are moving and setting things up.

At the same time, semi-permanent and permanent steel structures are now easier to manufacture and build. Market leader Smart Space has a variety of temporary buildings solutions for UK and European companies who need to expand their operations while limiting the required time and money to do that. Pre-fabricated steel buildings that comply with local building regulations and customisable solutions for specific business needs are just a couple of phone calls away.

The former is considered better as a temporary solution. EU and UK regulations allow temporary buildings to be used for as long as 28 days without permits or building inspections. For more permanent structures, companies like Smart Space already have a set of documents to help speed up the process of getting permits. In fact, Smart Space actively helps partners in complying with local building regulations and getting the correct permits.

There is also the challenge of filling key roles as companies move to an entirely new country. The EU is seeing this influx of investment as a way to balance between the stream of new migrants and demand for workers. Training programs are being implemented and more professionals are making themselves available. This kind of balance is the ingredient the EU needs to reposition itself as a driving economic force of the world.

Everything Falls into Place

The potential trade war against the United States is still something that needs to be avoided. There are so many negative impacts if a trade war does break out, along with side effects that aren’t always measurable before they hit. Unfortunately, a full-blown trade war may be where we are heading when factors like the way current US administration treats its allies are taken into account. The best way to prepare for the trade war and the series of tariffs that follow is by helping businesses maintain the ideal economic climate and a sustainable growth rate.

However, the solutions are all there. Using temporary buildings as an example, the market is ready for rapid changes; it is ready to adapt to any kind of challenge in a cool and calculated way. Temporary buildings can accommodate any need and they serve as the perfect foundation for companies who are moving their business operations to Europe. Businesses can then build a more permanent facility while keeping their production lines running.

Infrastructure, workforce, and sources of investment are minute ingredients when seen individually, but they are the perfect combination for the EU right now. The sudden spike in investments will strengthen EU’s position in the Brexit negotiation, all while maintaining a good relationship with the UK. As more companies move to countries like Germany, the entire European economy will be stronger and will grow alongside the growth of new and existing businesses.

The fact that companies in industries other than manufacturing are also considering a move to Europe ties everything together. Experts believe that Europe has the potential to become the next tech central within five years. We are already seeing clusters of tech start-ups in cities like Paris and London. It is only a matter of time before more tech start-ups and businesses in other fields begin considering a move to Europe and UK.

Harley-Davidson is the first of many big companies that formally announce their plan to move their manufacturing operations to Europe and Asia. Other companies are making similar announcements already. Let’s not forget that there is €2.8bn worth of US goods that are now subject to European tariffs. Many of these tariffs are meant to target specific products like whiskey (Kentucky) and orange juice (Florida).

The true impact of US tariffs and the retaliatory tariffs introduced by the EU remain to be seen. The EU has an advantage thanks to its vast cooperative network. In the case of Florida orange juice, for example, EU-based companies can work with suppliers in Brazil or other tropical countries in order to avoid paying a hefty tax on oranges and orange juice. The impact of these tariffs to the economy as a whole, on the other hand, appears to be positive, especially as more companies announce their plans to move to Europe.

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