As US electric carmaker tesla is set to enter the indian market, the US is trying to reduce India's tariffs on car imports. india currently imposes a 110% tariff, restricting the sale of foreign cars domestically. tesla CEO Elon Musk has criticized these tariffs as one of the highest in the world.
The US is pushing for india to remove car import tariffs through a bilateral trade agreement. However, the indian government is reluctant to immediately reduce the tariffs due to opposition from domestic car manufacturers. Former US President donald trump has been constantly criticizing India's tariffs. In his speech to the US Congress, he warned india to resolve the issue quickly or face retaliatory measures.
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The indian government has not rejected the US demand but wants to consult with the local industry. Last month, after the meeting of indian Prime minister Narendra Modi and donald trump, it was announced that steps will be taken to finalize the trade agreement by 2025. The indian government has approached the US demand with caution. india is exploring possible ways to make these changes so that it does not affect the domestic automobile industry. India's major car manufacturers, Tata Motors and mahindra are worried that the price cut will be severely affected. Their reasoned opinion is that while indian companies are growing in the electric vehicle sector, the entry of American and other foreign companies could reduce local investments. india is unlikely to accept the US's immediate tariff waiver request. However, the indian government is trying to create a framework for making some changes to the tariffs.Last month, the indian government held talks with domestic car manufacturers to discuss possible tax cuts. india recently reduced import duties on 30 items, including high-end motorcycles. The government also announced plans to review additional duties on luxury cars. The decisions reflect a soft shift in India's trade and tax policy. tesla wants to manufacture in india under the "Make in India" program. If taxes are reduced, tesla will be able to sell vehicles in india at lower prices. The government is working to improve the electric vehicle infrastructure. These discussions are expected to figure prominently in the upcoming India-US trade talks.
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