CHICAGO (Reuters) – Caterpillar Inc’s earnings on Wednesday missed Wall Street’s estimates, hurt by a combination of weak sales in China and higher production and restructuring costs, pushing its shares down 4.3% in morning trade.

The heavy equipment maker said its full-year earnings are expected to be at the lower end of its earlier forecast.

The Deerfield, Illinois-based company, a proxy for global economic activity, benefited in the past year from the strongest global growth since 2010. However, a tariff war between the United States and trade partners including China has sapped business confidence, dampening economic activity.

The International Monetary Fund on Tuesday lowered its forecast for global growth this year and next, its fourth downgrade since October.

Still, Caterpillar expects moderate sales growth this year, helped by an expected recovery in demand for machines for the oil and gas sector.

Andrew Bonfield, Caterpillar’s chief financial officer, said the company saw a $70 million tariff bill in the quarter and higher labor and restructuring costs. Weak sales of machines at its high-margin energy & transportation business also weighed on overall profits, he said.

Restructuring and tariffs costs are expected to moderate in the second half of the year, Bonfield said, and manufacturing costs will be passed on to customers through higher prices.

In a worry for the company, sales of construction machines in China declined, dragged down by slowing economic activity and competitive pricing.

The world’s second-largest economy accounts for up to 15 percent of Caterpillar’s construction equipment sales. It is facing competition from local Chinese players trying to chip away at its market share through aggressive pricing.

Bonfield said the company was looking to counter the competition with new products rather than price cuts.

In the second quarter, Caterpillar reported net income of $1.62 billion, or $2.83 per share, compared with $1.71 billion, or $2.82 per share, a year ago. Analysts surveyed by Refinitiv, on average, expected earnings of $3.11 per share.

The company retained its full-year earnings forecast of $12.06-$13.06 per share.

Its shares were last trading down 4.3% at $132.17, weighing on the Dow Jones Industrial Average.