Trump’s trade war: How will Indian agriculture trade withstand the storm

On April 2, President Donald Trump is set to announce both reciprocal and sectoral tariffs, a move that will have significant consequences for global trade. India, often labeled the ″tariff king″ by Trump, has been a focal point in discussions related to customs duties and trade imbalances.

The new tariffs aim to counter foreign trade barriers on US goods, aligning with the administration’s ″America First″ policy. This development comes at a time when India maintains one of the highest tariff structures on agricultural imports, with key commodities such as coffee, tea, and palm oil facing duties of up to 100%.

Understanding the US Tariff Proposal

In February 2025, Trump signed a Presidential Memorandum proposing reciprocal tariffs to counterbalance import taxes imposed by other nations on US goods. The primary objective of this move is to address the US’s expanding trade deficit, which reached USD 918.4 billion in 2024. India’s trade surplus of USD 45.7 billion with the US has led to calls from Washington for a reduction in duties, especially in agricultural trade. Currently, India’s simple average tariff rate is 17%, whereas the US maintains a rate of 3.3%. The difference is even more pronounced in the agricultural sector, where India has an average tariff of 39% and a trade-weighted average of 65%, compared to the US’s 5% and 4%, respectively.

India’s Agricultural Trade Policies and Tariffs

India’s agricultural sector remains heavily protected, with high tariffs shielding domestic farmers from international competition. While these policies support rural livelihoods, they have drawn criticism from trade partners like the US. India’s agricultural exports to the US, including frozen shrimp, basmati rice, and natural honey, currently enjoy low tariffs, but reciprocal measures could threaten their competitiveness. For instance, frozen shrimp enters the US duty-free, while rice faces an 11.2% tariff. If the US implements matching duties, India’s agricultural exports may struggle against competitors like Vietnam and Thailand.

The following table provides a snapshot of India’s current import duty structure on key agricultural commodities:

Potential Impact of Reciprocal Tariffs

Trump’s proposed tariff changes could disrupt India-US trade relations, particularly in agriculture. Increased tariffs on Indian agricultural exports could impact major sectors, from seafood and rice to processed foods. Reciprocal tariffs may also lead to stricter sanitary and phytosanitary (SPS) regulations, adding compliance burdens for Indian exporters. Additionally, the US may impose licensing requirements or expand non-tariff barriers, further complicating market access for Indian agricultural goods.

India’s dairy sector is particularly vulnerable due to strict non-tariff barriers, including a ban on dairy imports from animals fed with ruminant-derived feed. While the US has proposed certifying its dairy products as grass-fed, India remains firm on its regulatory framework. Genetically modified (GM) crops are another contentious issue, with the US pushing for relaxed import restrictions. If Trump’s administration enforces stringent reciprocal measures, India’s agri-trade landscape could undergo significant changes.

Navigating the Challenges: Policy Recommendations

To mitigate the impact of potential US tariffs, India may need to recalibrate its trade policies. Reducing tariffs on select agricultural products, such as food preparations, dairy, and processed foods, could ease tensions. India has already lowered tariffs on Washington apples from 50% to 15%, signaling a willingness to negotiate. A phased reduction in other high-tariff categories may be necessary to prevent retaliatory actions.

Beyond tariff adjustments, India should focus on enhancing agricultural productivity and modernizing its supply chains. Increased investments in mechanization, irrigation, and high-yield crops can improve competitiveness. Currently, India’s agricultural investment remains below 0.5% of agricultural GDP, far behind global benchmarks. Rationalizing subsidies, such as the INR 1.56 lakh crore fertilizer subsidy, and investing in research and development could drive long-term growth.

Furthermore, improving logistics infrastructure, particularly cold storage and export processing zones, can enhance India’s agricultural export competitiveness. The Agricultural and Processed Food Products Export Development Authority (APEDA) can play a vital role in transforming key production clusters into agri-export hubs.

Balancing Domestic Interests with Global Trade

Trump’s tariff policies pose a challenge for India’s agricultural trade, requiring a careful balance between domestic protectionism and global competitiveness. While India’s high tariffs safeguard its farmers, adapting to evolving trade dynamics is crucial for sustaining export growth. By adopting a mix of strategic tariff reductions, productivity-driven competitiveness, and policy reforms, India can navigate the challenges posed by the US’s reciprocal tariff measures while continuing to expand its presence in international markets. The next few months will be pivotal in determining the future of India-US agricultural trade relations, making policy decisions in this space more critical than ever.