By Rajesh Kumar Singh

CHICAGO, July 23 (Reuters) – Harley-Davidson Inc
will give investors on Tuesday a fresh look at the impact of
trade conflicts and a strong dollar on its profits, and analysts
are bracing for bad news and more cost-cutting.

Analysts polled by Reuters, on average, expect the
Milwaukee, Wisconsin-based company to report a profit of $1.34
per share, below the $1.48 per share reported in the
corresponding period a year ago.

The earnings report comes a few weeks after Harley announced
a plan to move production of motorcycles for the European Union
from the United States to its overseas facilities to avoid the
tariffs imposed by the trading bloc in retaliation for Trump’s
duties on steel and aluminum imports.

To offset falling demand at home, Harley has been aiming to
boost overseas motorcycle sales to 50 percent of annual volume
from about 43 percent. With revenues from EU countries second
only to the United States, the region is a key part of its
growth strategy.

However, the decision to shift production overseas sparked
an angry reaction from President Donald Trump, who threatened to
impose higher taxes on the company and warned of a public
backlash if Harley went ahead with the plan. Trump, however, did
not specify how he could target Harley-Davidson with higher
taxes, and no action has been taken since he made the threat in
late June.

Harley has assembly facilities in India and Brazil, and is
expected to launch an assembly plant in Thailand in September.

The fallout from Washington’s restrictive trade policies has
exacerbated the travails of a company that has been grappling
with an ageing customer base, weak demand from younger buyers
and discounts offered by its rivals.

Late last month, Harley forecast that the EU tariffs would
cost the company about $30 million to $45 million for the
remainder of 2018 and $90 million to $100 million on a full-year
basis.

That will be on top of an additional $15 million to $20
million the company is estimated to pay for raw materials this
year because of rising steel and aluminum costs due to Trump’s
tariffs on imports.

Harley is still the dominant player in the heavyweight
motorcycle market in the United States, but its market share has
steadily fallen, to 50.4 percent from 58 percent in 2013.

In January, it announced the closure of a plant in Kansas
City, Missouri, after its motorcycle shipments fell to their
lowest level in six years.

Analysts at Goldman Sachs and Bernstein expect the company’s
U.S. retail sales to be down 7 percent in the June quarter after
a 12 percent annual decline in the first quarter. Goldman
analysts said, “Harley may continue to rationalize its U.S.
business throughout the year.”

Harley-Davidson shares have lost about 8 percent since early
March when the trade skirmish between the United States and the
EU started, and are down over 22 percent since end-December
2017.

(Reporting by Rajesh Kumar Singh
Editing by Leslie Adler)