Harley-Davidson Inc. (HOG.N) profit topped estimates even as tariffs that Europe implemented in retaliation to President Donald Trump’s levies on steel and aluminum raised costs.

-Earnings per share on a GAAP basis dropped to 80 cents in the first quarter, the Milwaukee-based manufacturer said in a statement Tuesday. Excluding restructuring and tariff costs, profit slumped to 98 cents a share, though that exceeded analysts’ average estimate for 85 cents.

Key Insights

-While motorcycle revenue was down and operating income slumped due in part to tariffs brought about by Trump’s trade policies, expenses and restructuring charges fell.

-Harley is moving some U.S. production overseas to sidestep European Union tariffs that jumped to 31 per cent from 6 per cent. Last year, this sparked the ire of Trump, who said he’d back a boycott of the company’s bikes. Tariffs will cost the company between US$100 million and US$120 million in 2019, executives said in January.

-In a Tuesday morning tweet shortly after Harley reported results, Trump said the tariffs were “so unfair” to the U.S. and said he’ll reciprocate.

-U.S. retail sales fell 4.2 per cent in the first three months of the year, the ninth consecutive quarterly drop. Harley is struggling to attract younger riders as consumer tastes shift away from pricey, heavyweight motorcycles. It debuted its first electric motorcycle, LiveWire, in January and acquired an e-bike company in March.

-Sales in Europe and Asia -- regions CEO Matt Levatich has pinned hopes for growth on -- fell 0.6 per cent and 4 per cent, respectively. Levatich wants to derive 50 per cent of revenue from outside the U.S. by 2027, according to a turnaround plan he presented last summer.

-A new plant in Thailand is supposed to help Harley avoid tariffs, but it’s still unclear whether the EU will exempt Harley’s Asia-made bikes from levies, according to Wells Fargo.

Market Reaction

-Harley shares rose 2.2 per cent to US$40.60 as of 7:01 a.m. in New York, before the start of regular trading. The stock has rallied 16 per cent this year, in line with broader market gains, after closing at an eight-year low on Dec. 24.

Get More

-Harley is still investing in the U.S. It committed to put US$65 million into its Milwaukee facility and $10 million into its Tomahawk, Wisconsin plant as part of a five-year contract with the United Steelworkers that was ratified this month.