By Rajesh Kumar Singh

CHICAGO (Reuters) -Harley-Davidson Inc’s shares soared to their highest level in over three years on Monday after the European Union decided to suspend a planned increase in retaliatory tariffs on the company’s motorcycles as part of a partial trade truce with the United States.

The EU had threatened to double the tariffs on Harley motorcycles, American-made whiskey and power boats to 50% on June 1 in retaliation for steel and aluminum tariffs imposed by former President Donald Trump.

The European Commission, which oversees EU trade policy, said on Monday it would suspend the planned hike of retaliatory tariffs for up to six months.

Harley’s shares gained 8.5% on Monday to $51.73, their highest level since January 2018.

While the company welcomed the truce, it plans to continue legal challenges to an EU ruling that revoked a concession allowing it to ship bikes from facilities outside the United States at a tariff rate of 6%.

“This is the first step in the right direction in a dispute not of our making,” said Chief Executive Jochen Zeitz. “Harley-Davidson employees, dealers, stakeholders and motorcycles have no place in this trade war.”

Harley’s bikes are now subjected to a 25% retaliatory tariff, increasing the overall duty on its bikes shipped to the European Union to 31%.

The Milwaukee-based company is betting heavily on Europe, its second-largest market after the United States, to help fuel its turnaround strategy. But higher tariffs would give its rivals including Triumph, Honda and Suzuki a massive pricing advantage.

The 118-year-old American brand had tried to escape the punitive measure by shifting the production of motorcycles for European markets to Thailand from the United States – a move that prompted Trump to back a boycott of the motorcycle manufacturer.

However, the EU last month ruled that its bikes produced in Thailand would be treated as U.S.-made.

(Additional reporting by Shreyasee Raj in Bengaluru; Editing by David Gregorio and Cynthia Osterman)

---