Harley Davidson fears sales drop on possible retaliatory tariff by EU; shares decline

The European Union, in retaliation to new U.S. tariffs on EU steel and aluminium exports is planning tariffs on US products including bourbon, motorcycles and blue jeans worth up to 2.8 billion euros ($3.3 billion), as reported to  the World Trade Organization.

Harley-Davidson said a trade war with Europe or retaliatory tariffs would "significantly" hurt motorcycle sales. Shares of the dropped as much as 2.3% on Friday after the news had floated in the market.

The popular motorcycle company's manufacturing costs have already been affected by Trump’s tariffs on steel and aluminium imports.  If the European increases duties on imported motorcycles and other goods, it would directly hit Harley's product sales in Europe.

Harley-Davidson shipped about 19% of its products to Europe in the first quarter of FY 2018, according to the company's earnings release.

"Import tariffs on steel and aluminium will drive up costs for all products made with these raw materials, regardless of their origin," the company statement said.

"Additionally, a punitive, retaliatory tariff on Harley-Davidson motorcycles in any market would have a significant impact on our sales, our dealers, their suppliers and our customers in those markets."

"If players in the world don't stick to the rule book, the system might collapse. That is why we are challenging the US and China at the WTO," EU Trade Commissioner Cecilia Malmstrom said.

The Milwaukee-based company is already down 21.2% this year. Harley is currently evaluating options for managing anticipated cost increases following the import tariff and EU's proposed measures.