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Harley-Davidson Lowers Guidance as It Braces for EU Motorcycle Tariffs

Harley-Davidson is probably already feeling the effects of the Trump Administration’s trade war, noting in its second quarter earnings report that the impact of motorcycle tariffs would likely cut into profits.

The Milwaukee-based motorcycle manufacturer announced on Tuesday that it had lowered its profit guidance for 2018 and it expects its operating margin to be just 9% to 10% this year, “given the expected impact of tariffs in 2018,” down from a previous expectation of 9.5% to 10.5%.

“Our results in the second quarter reflect business performance that is in line with our expectations. With the focus of every employee and dealer, we are making progress building the next generation of Harley-Davidson riders in line with our long-term objectives, said Matt Levatich, president and chief executive officer of Harley-Davidson, in a statement. “Our manufacturing optimization, demand-driving investments and commitment to manage supply in line with demand remain on target and continue to strengthen our business.”

The company’s U.S. retail sales dropped 6.4% to 46,490 in the second quarter, while its total international sales rose 0.7% to 31,938, it said in the report. Harley’s global motorcycle shipments also fell 11%, to 72,593.

Overall, Harley reported a profit of $242.3 million for the quarter, with earnings per share at $1.45, compared with a profit of $258.9 million, or $1.48 a share, the company reported last year.

Amid the drop in profit, Harley’s shares still managed to rise just over 3% to $42.72 in pre-market trading.

In June, Harley announced that it would be shifting some production overseas in order to dodge the European Union’s regulatory tariffs. The EU’s tariffs came in response to the Trump administration’s tariffs on steel and aluminum from the EU, Mexico, and Canada.