The US wants India to eliminate tariffs on cars coming from the US to India as part of the proposed trade deal between the two countries. But India does not want to reduce such tariffs to zero immediately. However, further reduction of tariffs is being considered. This has been said in a Reuters report quoting sources. One of the issues in the formal talks for a bilateral trade deal between the two countries will also be the high tariff on autos in India.
Let us tell you that American billionaire Elon Musk's company Tesla is about to enter the Indian market. Tax on imported cars in India is up to 110% and it is one of the highest taxes in the world. Musk has criticized this. Now Musk has got the support of US President Donald Trump. Trump has repeatedly opposed India's high taxes. Addressing Congress on Tuesday, he condemned the country's more than 100% auto tariff, and threatened retaliatory action.
Indian government is in talks with domestic manufacturers
According to Reuters, a source said, "The US wants India to reduce tariffs to zero or almost negligible in most sectors except agriculture." A second source said India is listening to the US and has said it will respond to its position on tariffs after consulting local industries. However, India is unlikely to relent on US demands for immediate zero tariffs on auto imports. But the country is pushing the industry to prepare for a lower tariff regime and remain open to competition. Last month, the Indian government met domestic car manufacturers to decide on any tariff cuts and understand their objections to immediate zero taxes.
Why are domestic companies against reducing tariffs
India's car market is 4 million vehicles per year. Domestic manufacturers have previously argued against reducing tariffs. They say that such a move will kill investment in local manufacturing by making imports cheaper. Companies such as Tata Motors and Mahindra & Mahindra have specifically lobbied against reducing import tariffs on electric vehicles. They say that this will harm this newly emerging sector in which they have invested heavily.
