Reciprocal taxes: Is Trump riding the Harley-Davidson case again?

US president Donald Trump on Friday threatened to slap “reciprocal taxes” on countries that levy high tariffs on imports from America, citing a case and rate he has used frequently to press his case regarding bilateral trade with India.

“When a country taxes our products coming in at, say, 50 per cent, and we tax the same product coming into our country at ZERO, not fair or smart,” Trump tweeted on Friday, a day after announcing that he would impose 25% and 10% tariffs on steel and aluminum imports respectively next week. It is feared that such a move will lead to a trade war.

“We will soon be starting RECIPROCAL TAXES so that we will charge the same thing as they charge us. $800 Billion Trade Deficit-have no choice!” he added in the post.

Trump has, in recent days, spoken a number of times about the 50% duty that New Delhi levies on the motorbikes that Harley-Davidson, an American company, sells in India. And, each time, he has made it a point to add that the United States levies “zero” duty — or “nothing” — on motorbikes imported from India.

Here is what he told state governors at a White House meeting earlier this week, bringing up a phone conversation with Prime Minister Narendra Modi: “Now, the prime minister, who I think is a fantastic man, called me the other day. ‘He said, ‘We are lowering it (tariff on Harley-Davidson) to 50 per cent.’ 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. And you know what I’m talking about.”

It wasn’t clear from Friday’s tweet if the US president plans to levy a matching import duty on Indian motorbikes when he threatened “reciprocal taxes”.

The steel and aluminum tariff rates he will announce next week are linked to his larger campaign promise to cut the US trade deficit of $800 billion (in 2015). Based on an investigation ordered by Trump to probe its cause and recommend remedies, the US department of commerce determined that deficits in steel and aluminum trade “threaten to impair national security”. It recommended 24% tariff on steel imports from all countries or 53% from the 12 major suppliers (including India). Trump is going for a global tariff but at a higher rate of 25%.

The suggestions for aluminum were 7.7% global and 23.6% on some countries. However, he is going for global at 10%.