Harley-Davidson executives said the company would not raise prices on their motorcycles, but rather they will absorb the cost and are expected to lose up to $100 million.
Harley said increasing production at its overseas global plants would require incremental investments and could take at least nine to 18 months.
Europe is Harley's second-largest market after the USA, and the company isn't willing to cede market share by raising prices.
The tremendous expense if passed onto its dealers and retail customers would have a lasting detrimental impact to its business in the region, the company said in a regulatory filing. But because of President Donald Trump's trade war with the European Union, tariffs recently grew from 6 percent to 31 percent, adding an additional $2,200 to each motorcycle exported from America.
The firm's stock fell nearly 6% to $41.57 in a turbulent day for USA stocks amid concerns of a trade war.
Hours after Mnuchin's tweet, Peter Navarro, head of the White House office of trade and manufacturing policy, appeared to contradict the treasury chief.
To hear President Donald Trump explain it, tariffs should force foreign manufacturers to "build them here", but Harley-Davidson's announcement shows how a trade war will give American businesses a strong incentive to relocate elsewhere. It confirmed today that, as a result of the tariff squeeze, it will now move a decent-sized chunk of production outside of the US. That will add an estimated $90 million to $100 million in costs annually.
It's still unclear where the company would move the work, but Indian observers on Tuesday hoped that their existing Harley-Davidson production hub would see a boost.
Not long ago, US President Donald Trump pointed to Harley-Davidson as an example of what was going to go right for manufacturing in America.
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"We think Harley's decision to protect European Union demand is wise for the long-term health of the market", Baird Equity Research said in a note.
U.S. president Donald Trump has used Harley-Davidson as an example of a United States business that is being harmed by trade barriers.
In January, Harley-Davidson announced that it would be closing its plant in Kansas City and moving leftover production to York, Pennsylvania.
The impact on USA workers because of Harley-Davidson's decision was not immediately clear. A White House spokeswoman did not immediately respond to a request for clarification.
However, the tariffs have also helped to spur investment in USA steel plants. It has factories in Brazil, India and Thailand.
The EU, like Canada, Mexico and China all are aiming retaliatory tariffs at targets aimed to weaken Trump and the GOP in key political battlegrounds.
The company did not say where production would be shifted, or how many jobs might be affected, but said the move would take nine to 18 months to complete.
European Commission Vice President Jyrki Katainen said unilateral action by Trump in disputes over steel, China's technology policy and other issues highlighted the need to modernize the World Trade Organization to reflect developments in the world economy.
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