NEW DELHI: As April 2 approaches, India faces uncertainty over US President Donald Trump’s plan to impose reciprocal tariffs on India and 25 other countries. These tariffs could impact sectors like agriculture, which employs about 700 million people and is crucial for food security. Currently, there is a lack of clarity regarding how the US will implement these reciprocal tariffs especially on agriculture and allied sectors.
“We still do not have clarity on whether the reciprocal tariffs will be applied sector-wise, as a single reciprocal tariff for each country, or if there will be separate tariffs for industrial and agricultural products,” stated a senior official from the Ministry of Commerce.
Designed to protect small farmers and compliant with WTO rules, India’s tariffs include significant rates on key agricultural products like 45% on soybean and 100% on wheat.
“India’s tariffs adhere to WTO regulations,” explained Abhijit Das, former Head and Professor at the Centre for WTO Studies at the Indian Institute of Foreign Trade. “The US is attempting to achieve what it couldn’t through WTO negotiations by threatening unilateral tariffs,” he added.
India’s concern stem out from the fact that it is the largest trade partner to the US not vice versa. India exports 18% of its total export to the US whereas the share of US trade in India accounts for only about 2.31%. During 2023-24, India enjoyed a trade surplus of $35.31 billion with the US.
Experts argue that the trade deficit is misleading when considering the share and value of trade. The US exports high-value products to India, including mineral fuels and oils, nuclear reactors and boilers, and electrical machinery.
“The US share is just 2.31% in trade, but its value is significantly high, whereas India’s trade share of 18% has a relatively lower value,” stated Abhijit Das.
Additionally, India’s agriculture and allied sectors constitute only 2.5% of the total trade value with the US.
It looks any tinker with current trade tariff would benefit the 3.9 million American farming community but at the cost of India’s 50% population (around 700 million) which depends on agriculture. “It seems that the US is seeking special treatment, which goes against WTO agreements,” said Ramesh Chand, a well-known agricultural economist and member of the government’s think tank, NITI Aayog. “Any changes in tariffs would apply to other countries as well. For any special treatment, India and the US must establish a bilateral trade agreement to address the trade tariff issue,” he added.
A USDA report titled ‘Opportunities for US Agricultural Products in India’ suggests that climate change may restrict India’s ability to feed its growing population, increasing reliance on imports. The US views this as an opportunity to expand exports to India, with projections indicating that India’s agricultural market could triple over the next two decades.
“Indian farmers cannot compete with unevenly balanced level of subsidy given to US farmers,” said Devinder Sharma, an agricultural trade expert. Declining cotton production in India, from 37 million bales in 2017-18 to an estimated 31.6 million in 2023-24, raises concerns.
The U.S. sees this as an opportunity to increase its cotton exports. Additionally, U.S. Wheat Associates predict that high tariffs in India may result in a loss of $792 million in the coming years.
Experts say there is also pressure to lift India's prohibition on genetically modified maize and ethanol, potentially benefiting the U.S. by $300 million.
Sharma warns that India's previous oilseed self-sufficiency has declined due to lower import duties and flooded markets with cheaper palm oil. All India Kisan Sabha, a farmers' organization, is urging protests against the Indian government's failure to stand up to U.S. pressures.