Key Announcements Made – U.S. President Donald Trump’s recent imposition of a 26% “discounted reciprocal tariff” on Indian imports has made India’s exports to USA volatile. The impact of these tariffs is expected to vary across industries–while some industries may face challenges, others could benefit from new opportunities, especially where competing nations are subject to higher tariff rates.
What does it mean for Indian agriculture and food exports
- Seafood Industry: The U.S. is a significant market for Indian seafood, especially shrimp, which accounts for nearly 40% of India’s seafood exports to the country. Despite the imposition of a 26% tariff, the Indian seafood sector may remain competitive. This is because rival exporters like Vietnam and China are facing even higher US tariffs—46% and 34% respectively. This could provide Indian exporters with a relative advantage, and might even lead to increased seafood exports to the U.S.
- Rice Exports: India exports approximately 250,000 to 300,000 tonnes of rice annually to the U.S. The newly imposed 26% tariff raises concerns about the continued competitiveness of Indian rice in the American market.. However, since other major rice exporters like Vietnam and Thailand are facing similar or higher tariff rates, India’s position may not be significantly affected. To retain market share, Indian exporters will need to focus on maintaining high quality and improving cost efficiencies.
- Spices: The U.S. is a significant market for Indian spice exports and will come under pressure with the imposition of reciprocal tariffs. Some Indian spices face competition from alternative suppliers that have been targeted with lower tariffs–for example, Brazil at 10% for black pepper, Guatemala at 10% for cardamom, and Egypt at 10% for cumin. However, other spices like turmeric and chilli have competing exporters that are subject to higher tariffs than India, potentially giving Indian exporters a relative advantage in those segments.
- Dairy: India has significant dairy exports to USA–valued at US$ 181 million–which would come under pressure with higher tariffs. However, the bulk of these exports consists of products like clarified butter and cottage cheese, for which India faces less competition. On the other hand, the U.S. exports significant volumes of dairy to countries like South Korea, Japan, and those in Southeast Asia. If these countries impose counter-tariffs on U.S. dairy products, it could open up new export opportunities for Indian dairy producers in those markets.
- Processed Food, Sugar, and Cocoa: Indian exports in these categories are valued at approximately $1.03 billion. The imposition of a 26% tariff is likely to reduce the price competitiveness of Indian processed foods, sugar, and cocoa products in the U.S. market, potentially leading to a decline in export volumes.
Overall Implications:
|
Product |
Earlier Tariffs |
New Tariffs |
|---|---|---|
| Rice |
0% – 1% |
36% (10% Universal + 26% Reciprocal) |
| Spices |
0% – 5% |
36% (10% Universal + 26% Reciprocal) |
| Dairy |
0% – 10% |
36% (10% Universal + 26% Reciprocal) |
| Processed Foods |
~5% |
36% (10% Universal + 26% Reciprocal) |
| Seafood |
0% |
36% (10% Universal + 26% Reciprocal) |
While the 26% reciprocal tariff presents significant challenges, the relative advantage over competitors facing higher rates may enable certain Indian agricultural exports to maintain their foothold in the US market. Nonetheless, sectors like processed foods, sugar, cocoa, and spices will need to strategize to mitigate the adverse effects of these tariffs. Diversifying export destinations, enhancing product quality, and engaging in diplomatic negotiations could be pivotal in navigating this altered trade landscape.
** Trade value and volumes are from trade promotion bodies and Trade Map**
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