Why Trump is obsessed over Indian tariff on Harley-Davidson?

The company’s decision to end India business is part of its plans to focus on 50 of its most profitable markets including the US and Europe. Representative Photo: Wiki

In the ongoing trade conflict between India and the United States, Harley Davidson has figured once again.

The US President Donald Trump, who over the years have been lashing out on India over its high tariff on the iconic motorcycle, took it up before the G-20 meet in Osaka early this week.

In March 2019, at the Conservative Political Action Conference (CPAC), Trump had rued that, “When we send a motorcycle to India, they charge 100 per cent tariff. When India sends a motorcycle to us, we charge nothing.”

Earlier this month, Trump even made a call to Prime Minister Narendra Modi, following which India reduced its import tariff on Harley-Davidson to 50 per cent from 100 per cent. Yet, Trump did not find the move acceptable.

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“He (PM Modi) reduced it by 50 per cent with one phone call. I said it’s still unacceptable because it’s 50 per cent versus nothing. It’s still unacceptable. And they’re working on it,” Trump told CBS news in an interview on June 10. US imposes no duty on motorcycles imported from India.

Also read: At G20, Donald Trump shows Uncle Sam is nobody’s friend

Trump’s fondness with Harley-Davidson may well have been a reason for India to spare it while imposing retaliatory tariffs on 28 goods imported from the US. Recently, India raised tariffs on US goods such as walnuts, Washington apples, chickpeas in retaliation to the US decision of hiking customs duties on certain steel and aluminium products.

Harley-Davidson, which entered the Indian market in 2007, sells 17 models in India, of which 13 are manufactured or assembled locally at its facility in Bawal in Haryana. The import duties impact only four models whose prices range from ₹10.9 lakh to ₹30.5 lakh.

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Earlier, Harley-Davidson’s managing director for India Sajeev Rajasekharan told The Economic Times that import duties have nominal impact on the company’s operations in the country. A majority of the Harley-Davidson models sold in India are the ones that are assembled in India, he said.

According to the Society of Indian Automobile Manufacturers, the auto company sold 1,513 units in 2018-19, down 4.2 per cent compared to the previous year. The American premium bike maker sold 3,473 units in 2017-18.

One of the reasons for Trump’s obsession with Harley-Davidson could be that fact that the century-old auto company is seen as a symbol of American pride. Trump won the 2016 US Presidential election on the promise of making America great again and protecting everything that was American. On one occasion, he had even termed Harley-Davidson as the “pride of the United States”.

Moreover, the headquarters of Harley Davidson is located in the key Republican-controlled state of Wisconsin. Thus, it makes it essential for Trump to project his support for the company and keep his word of protecting the American auto manufacturer.

The sales of the legendary bikes are shrinking in its own country. Therefore the manufactures are trying to discover newer markets. India fits the bill as it is one of the world’s biggest markets for motorcycles.

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Harley Davidson bikes are known for its quality. They are excessively priced with huge profit margins. In price sensitive Indian market this hardly works. India being a low-income country the appetite for marquee products such as Harley Davidson is low. It’s largely a rich men’s fad in India.

The two way trade between India and the United States is at least $140 billion. Compared to this Harley Davidson hardly figures anywhere. But Trump keeps raising the issue just to make a point. He should rather have “a broader view of India-US trade relations”, say observers. Trump deliberately ignores the fact that India is the biggest importer of American defence equipments after Saudi Arabia.

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