On the surface, it seems like a straightforward math problem. The escalating trade battles between the United States and many other countries are raising production costs for a variety of companies. If the tariffs make it too costly to build in the US and then ship somewhere else, then move production somewhere else.
But leaders at Harley-Davidson—which this week announced it is shifting some motorcycle manufacturing outside of the US because of higher tariffs—have to think about more than just shifting raw materials, parts, and products. Indeed, experts say the people-related decisions could make or break a production shift … and not only at Harley but any firm in the same situation.
“Companies impacted by rapidly changing policies will also make sure that trained and available talent is also part of the decision-making process,” says Robert Rubin, a managing consultant in Korn Ferry’s Industrial Manufacturing practice.
Harley-Davidson says the new tariffs of an escalating trade war will add about $2,200 to the cost of the average motorcycle it produces in the US and ships to the European Union. Like many other manufacturers, Harley was already expecting higher costs from higher duties on steel, aluminum, and other raw materials, imposed earlier in the year. With the trade disputes only a few months old, no other major manufacturer has announced any tariff-related shifts, but experts believe that could change if the trade disputes last.
But any relocation decision involves finding skilled laborers, salespeople, managers, and others. If the talent can’t be found locally, companies have to give its current employees incentives to switch countries. Corporate leaders will have to figure out questions such as “What’s the cost of living difference?” “Are there job opportunities for spouses?” “How does the education system compare?” and more, Rubin says.
The result: The trade-related turmoil could cause a talent turnover. With every additional levy the US is proposing, its trade partners are countering with tariffs on products made in America. A trade war can create opportunities for companies—and people—working outside the countries duking it out to swoop in and provide products or services.
And if the trade-related personnel decisions weren’t enough, there’s also the potential for a severe shortage of talent in many parts of the world over the next two decades. Trade disputes may change the short-term costs of moving, but the availability of talent can impact it for considerably longer. A recent Korn Ferry study found that by 2030, there will be a global human talent shortage of more than 85 million people, or roughly equivalent to the population of Germany. That shortage isn’t a smooth or evenly distributed decline, either. For instance, China now has a surplus of manufacturing talent, but that could become a significant deficit in about a decade.