Trump's fresh 'high tariffs on Harley' jibe at India; he's right and wrong!

US President Donald Trump fired a fresh salvo at India on the high tariff regime on imported motorcycles in the country, citing the example of cult US cruiser maker Harley Davidson.

"India is probably the nation with the highest tariffs in the world. We have to stop that. I think we are understanding each other. Harley Davidson has to pay tremendous tariffs in India. When India sends its motorcycles to the US there are absolutely no tariffs. For the most part, there are absolutely no tariffs. I just said that is unfair and we are working it out," Trump said while addressing the press after his meeting with leading CEOs of India Inc.

India charges a customs duty of 50 percent on two wheelers that are brought into the country in completely built unit form. Harley imports four of its existing 17 bike portfolio in the country in this form. On top of this there is a 28 per cent GST when the bike is sold to the consumer and an additional cess of 3 percent taking the total tariff on these bikes to 81 percent. Hence, Trump wasn't far when he earlier claimed the bike attracted 100 pc tax as the import duty has been reduced by 10 pc. Bikes above 800 cc still attract 75 pc import duty, plus GST plus cess, adding up to 106 pc.

But look at the other side. Only 4 of Harley's 17 bikes sold in India are imported and sold as completely built units. These are Road King, Street Glide Special, Road Glide Special and CVO. They are priced between Rs 25.53 and 50.53 lakh and cumulatively their sales accounted for just about 50 units in 2019. At an average of Rs 35 lakh, the total import of Harley bikes last year of was barely worth Rs 17.5 crore. It's way too small to tilt the trade surplus in India's favour.

Despite such small numbers, Harley has clearly become the symbol of Trump's attacks against India for the US trade deficit with India.

Harley Davidson sold 2,252 units in India till January in this fiscal so far which was down 3.35 percent over the same period last year. The company has a 12,000 unit per annum assembly facility at Bawal in Haryana which was set up in 2011. At that time, it was only the second such facility for Harley outside of the US.

This is not the first time Trump has raked the issue of high tariffs with regards to India and specifically mentioned Harley's case. He had first made such a reference during his first address to the US Congress in March 2017. Then again in June 2018, Trump had taken a dig at Prime Minister Modi after India had reduced customs duty on imported motorcycles from high-end brands to 50 from 60 percent for less than 800cc engine capacity and 75 percent for the others.

"When Harley Davidson sends a motorcycle to India, as an example, they have to pay 100 percent tax," Trump had then said, adding, "Now, the Prime Minister, who I think is a fantastic man, called me the other day and he said we are lowering it to 50 percent. I said okay, but so far we're getting nothing. So we get nothing, he gets 50 [percent], and they think like they're doing us a favour. That's not a favour. You know what our tax is? Nothing. So I say we should have reciprocal taxes for a case like that."

At that time India had also revised duties on a range of components that are imported into the country. The import duty on engine, gearbox, or transmission mechanism as a completely knocked down (CKD) kit in pre-assembled form of motorcycles, not mounted on a body assembly, was reduced to 25 percent from 30 percent while the duty on import of engine, gearbox and transmission mechanism as a semi knocked-down (SKD) kit, which are not pre-assembled was hiked from 10 to 15 percent.

Trump has often railed against countries like India with whom the US has a negative trade balance but the pointed reference to Harley Davidson has repeatedly put the spotlight on the company. India enjoyed a $16.85 billion trade surplus with the US in fiscal 2019.

Globally the company sold about 228,424 units in 2019 registering its third straight annual decline in sales. India accounts for just about 1 percent of its global sales.