US president enacts phone call with Modi, spills beans on receiving advance notice of duty cut.
At his interaction with governors from across the United Sates on February 26, US President Donald Trump clasps his hands as he enacts his telephone conversation with Indian Prime Minister Narendra Modi over motorcycle tariffs. Credit: Screen grab from White House video
New Delhi: Donald Trump’s televised account of his recent telephone conversation with Prime Minister Narendra Modi on a tariff reduction for imports of Harley Davidson motorcycles has become a source of embarrassment for government managers here.
The Indian media has accused the US president of “mocking”, “mimicking” and “taking a dig at” Modi while the opposition Congress has blasted the prime minister for “undermining India’s sovereignty and financial independence” by alerting him in advance to a tariff cut that was eventually made four days later, on February 12. Modi called Trump on February 8.
In remarks at a business session with US governors at the White House on February 26, Trump brought up the case of India when he was talking about wanting reciprocal trade deals.
Directly pointing to Scott Walker, the Republican governor of Wisconsin, Trump said that that Harley Davidson motorcycles exported to India have to pay 100% tax.
“Now, the prime minister, who I think is a fantastic man, called me the other day and said we are lowering it to 50%. I said okay, but so far we’re getting nothing. So we get nothing. He gets 50 (per cent), and they think we’re doing — like they’re doing us a favour. That’s not a favour”.
This is the second time in a month that Trump has referred to the phone conversation of February 8 in which Modi informed him that India was going to cut duty to 50% on motorcycles imported by Harley Davidson.
Folding his hands, Trump acted out the phone call with the Indian leader:
“I wasn’t sure – he said it so beautifully. He’s a beautiful man. And he said, ‘I just want to inform you that we have reduced it to 75, but we have further reduced it to 50’. And I said, huh. What do I say? Am I supposed to be thrilled? And that’s not good for you people, especially as governors. It’s just not right. And we have many deals like that.”
Unlike an earlier occasion when Trump was accused of imitating Modi’s accent, the US president was careful not to mock or mimic the Indian leader’s style of talking. What he did was to enact a part of the telephone conversation.
Trump claimed that India has “a company” that does a “lot of business” in exporting motorbikes to the United States. “They have a motorcycle or a motorbike that comes into our country – the number is zero. We get zero. They get 100%, brought down to 75; brought down, now, to 50. Okay,” Trump said.
While the White House had issued a readout about the phone call on February 8, there had been no mention that there was any discussion on economic matters. From the Indian external affairs ministry, there has been complete silence about the Modi-Trump phone conversation, with no press statements or any replies to questions from reporters.
Trade disputes roil bilateral ties
Chennai headquartered Royal Enfield is the only Indian motorcycle that is exporting units to the US. According to an automotive site, they annually export around 1000 motorcycles to US.
India permitted the import of Harley Davidson motorcycles in 2007 after the US allowed the resumption of mango exports, suspended earlier due to “phytosanitary” concerns.
Incidentally, Business Standard had reported earlier that an import duty cut as demanded by the US president would not have much impact on Harley Davidson sales in India.
As per the report, Harley Davidson witnessed a decline in Indian sales in 2017-18 of about 12%, selling around 2686 units. This was the second consecutive year of decrease in sales after a 21% drop in 2016-17.
The customs duty cut impact could be marginal as full-assembled imported units account for just one-fifth of Harley Davidson’s volumes. The majority were brought to India as completely knocked-down (CKD) bikes, which are then locally assembled.
The CBEC notification dated February 12 that cut down customs duty on motorcycles of 800 CC and above from 75 to 50%, also hiked the duty on the import of engine, gearbox and transmission mechanism which are not pre-assembled from 10 to 15%. As per NDTV, this was done to “promote local assembling”.
There has been increasing tension between India and the US over trade issues, with US companies and Congress pushing for cutting down tariffs.
“It is important that India make greater efforts to lower barriers to trade, including tariff and non-tariff barriers, which will lower prices to consumers, promote development of value chains in India,” said US state department to Reuters.
The Trump administration had been touting that it will take action against countries which do not improve trade deficit with the US. In 2017, United States had a trade deficit of $22.9 billion with India.
Domestic politics also a factor
With rock bottom approval ratings, Wisconsin governor Scott Walker is facing a difficult re-election this year and is on Politico’s list of governorships “most likely to flip”. In 2015, he was briefly the front-runner in the Republican presidential primaries before eventually pulling out and lining up behind Trump’s presidential bid.