The United States is pushing India to remove tariffs on car imports as part of a proposed trade agreement. However, Indian officials are hesitant to eliminate these duties entirely in the short term, despite considering some reductions, according to sources familiar with the discussions.
India’s Auto Tariffs Under Scrutiny
One of the key issues in the trade talks between the two nations is India’s high import taxes on vehicles. At present, these tariffs can reach an astonishing 110%, a rate that has long been criticized by Tesla CEO Elon Musk as one of the highest in the world. The steep tariffs have been a significant barrier for Tesla’s entry into India, forcing the company to put its plans on hold in the past.
The issue has now gained traction at the highest levels, with U.S. President Donald Trump publicly condemning India’s auto import duties. In a recent address, Trump slammed the tariffs, which exceed 100%, and warned that the U.S. could take reciprocal measures if changes are not made.
Formal Trade Talks Yet to Begin
Despite U.S. insistence on reducing these barriers, India has not yet made a definitive commitment to cutting tariffs to zero. A source close to the discussions revealed that the U.S. demand is clear: tariffs in most sectors, apart from agriculture, should be reduced to negligible levels.
While India has not outright rejected these requests, it is still in the process of reviewing its position. Officials are expected to respond after consulting with local industries, many of which are protective of the current tariff structure.
Government representatives from both sides, including the United States Trade Representative (USTR) and India’s trade ministry, have so far declined to comment publicly on the ongoing discussions.
Aiming for a $500 Billion Trade Relationship
Trade relations between the two nations have been a key area of focus, particularly following a recent meeting between Indian Prime Minister Narendra Modi and Trump. The leaders agreed to work toward resolving tariff disputes and aim to establish the first phase of a new trade deal by late 2025. Their broader goal is to boost bilateral trade to $500 billion by 2030.
As part of this effort, Indian trade minister Piyush Goyal is currently on a diplomatic visit to the U.S., meeting with top officials, including U.S. Commerce Secretary Howard Lutnick and USTR Jamieson Greer, to discuss trade policies.
Resistance from India’s Auto Industry
Although India is exploring tariff reductions, it is unlikely to make drastic cuts immediately. The government has been preparing the domestic auto industry for a more competitive market, but concerns remain about the impact on local manufacturers.
Last month, Indian authorities held discussions with domestic carmakers to gauge their views on potential tariff adjustments. Many companies, particularly Tata Motors and Mahindra & Mahindra, have voiced strong opposition to any drastic changes. They argue that lowering import taxes would give foreign automakers an unfair advantage and discourage investment in India’s growing electric vehicle sector.
While India has taken steps to demonstrate its commitment to trade liberalization—including recent tariff reductions on high-end motorcycles and a review of luxury car surcharges—the question of auto imports remains a contentious issue. The coming months will be crucial in determining whether a compromise can be reached that satisfies both nations.