Report Says
Reciprocal tariffs by US may reduce or wipe out India's agri-trade surplus
This story was originally published at 19:02 IST on 6 March 2025
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NEW DELHI – In case of reciprocal tariffs by the US, India's farm exports to the US may come down and its imports from the US will go up, thereby reducing or even wiping out the agri-trade surplus, Indian Council for Research on International Economic Relations said in a report. India has enjoyed a consistent trade surplus of $35.3 billion over the years in exports and $3.46 billion in agricultural exports in 2023-24, it added.
US President Donald Trump has proposed "fair and reciprocal tariffs" to address the country's trade deficit. In 2024, the US trade deficit surged to $918.4 billion, up from $784.9 billion in 2023. Of it, the country had $45.7 billion with India. India's top export destination is the US, while India is the ninth-largest trading partner of America.
Trump has referred to India as "tariff king" criticising the South Asian country's high tariffs and trade barriers on American goods. During Prime Minister Narendra Modi's recent visit to the US in February, Trump said India will not be exempted from the proposed reciprocal tariffs.
While the US advocates for reciprocal tariffs under its ‘America First' policy, India has ‘Atmanirbhar Bharat' initiative to protect domestic farmers by maintaining higher import duties on agricultural products. Though both these strategies reflect protectionist policies, they come at the expense of consumers' wider choices, the report said.
India imposes significantly higher tariffs with a simple average rate of 17%, compared to 3.3% imposed by the US, according to the World Trade Organization. "The simple average tariff for agricultural goods in India is 39%, while the trade-weighted average is 65%, indicating strong protectionist policies by India," the report said. Meanwhile, the US maintains relatively low agricultural tariffs, with a simple average of 5% and a trade-weighted rate of 4%, it added.
Though India maintains its tariffs are within the overall limit of WTO regulations, it has already made some concessions on bourbon whiskey and Harley-Davidson. India has also signaled its willingness to negotiate with the US on a bilateral basis.
INDIA-US FARM TRADE
India's key agricultural exports to the US include frozen shrimp and prawns, basmati and non-basmati rice, vegetable extracts, natural honey, and processed food products. The US, in turn, is a critical supplier of soybean, crude soybean oil, maize, almonds, cotton, denatured ethyl alcohol, and pistachios.
While India specialises in labour-intensive, high-value agricultural exports, the US supplies capital-intensive and resource-based commodities, the report said.
"Fresh apples, a major US export, have historically been subject to a 50% duty, which was recently reduced to 15% following negotiations," the report said. Corn flakes and breakfast cereals are taxed at 30%. Cut chicken legs, a product the US has long sought market access for, face 100% tax, it added.
Skimmed milk powder still attracts a 60% tariff, making imports unviable despite India's domestic demand fluctuations. Dairy products, including fresh cheese and curd, are also subject to 30% import duties, restricting the entry of US dairy products into the Indian market.
India levies high tariffs on dairy products to protect its domestic dairy industry, which is highly cooperative-intensive. Allowing US dairy firms entry could enhance competition, potentially improving product variety and quality for Indian consumers, the report said.
On the other hand, India's exports of frozen shrimp and prawns, enter duty-free, while preserved shrimp faces a 5% tariff. Rice face a consistent tariff of 11.2% over the years. Products such as guar gum, vegetable extracts, and natural honey face minimal to zero tariffs.
The report suggested that India must focus on enhancing productivity, and not tariff protection to remain globally competitive. It also suggested adopting genetically modified seed varieties to improve yields of soybean and maize. India can start phased tariff reduction in outlier commodities and selectively apply tariff concessions to agricultural products facing high tariff differentials, the report said. End
US$1 = INR 87.11
Reported by Afra Abubacker
Edited by Deepshikha Bhardwaj
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