Trump’s Tariff Plan Threatens India’s Exports

Source: The post Trump’s Tariff Plan Threatens India’s Exports has been created, based on the article “Trump’s America First, an opening for Indian farms” published in “Indian Express” on 3rd March 2025.

UPSC Syllabus Topic: GS Paper2- International Relations-Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Context: The article discusses how US President Donald Trump’s plan for “reciprocal tariffs” could hurt India’s agricultural exports. It urges India to negotiate smartly, lower tariffs, and invest in agriculture to remain competitive and keep the US as a key trade partner.

For detailed information on Trump’s Policies Impact India’s Economy and Workers read this article here

What are Reciprocal Tariffs and Why is Trump Proposing Them?

1. US President Donald Trump plans to impose “reciprocal tariffs” to reduce the US trade deficit, which rose to $918.4 billion in 2024 from $784.9 billion in 2023.
2. The largest deficit was with China at $295.4 billion, while India accounted for $45.7 billion.
3. Trump criticized India’s high tariffs, calling it the “tariff king,” and hinted that India would not be exempt from these tariffs.
4. The goal is to match the import tariffs that other countries impose on US goods.

How Do India’s Tariffs Compare to the US Tariffs?

1. India’s simple average tariff is 17%, much higher than the US average of 3.3%.
2. The trade-weighted average tariff in India is 12%, compared to 2.2% in the US.
3. The difference is significant in agriculture: India’s simple average tariff is 39% and trade-weighted average is 65%, while the US has 5% and 4%, respectively.
4. This gap makes Indian agricultural exports to the US vulnerable if reciprocal tariffs are imposed.

Which Indian and US Goods are Affected the Most?

1. The US is India’s largest agricultural export market, with a surplus of $3.46 billion in 2023-24.
2. India exports shrimp, basmati rice, processed foods, and honey to the US. Key US exports to India include almonds, cotton, ethanol, and soybean oil.
3. High Indian tariffs affect US exports like whiskey (150%), walnuts and chicken legs (100%), skimmed milk powder (60%), and GM crops.
4. India bans GM soy and maize despite rising demand for animal feed and ethanol production, which frustrates the US.

What Can India Do to Address This Challenge?

1. India needs to negotiate smartly to retain the US market.
2. It has shown willingness to reduce tariffs selectively, like cutting tariffs on Washington apples from 50% to 15%.
3. Phased reductions in tariffs for food preparations (150%), walnuts (100%), cut chicken legs (100%), and dairy products (30–60%) can help ease tensions.
4. Seeking market access for Indian goods with a comparative advantage can balance the trade.
5. Improving R&D investments, which are below 0.5% of agri-GDP, is essential to stay competitive.

How Can India’s Agricultural Trade Benefit in the Long Run?

1. India should shift from heavy tariff protection to a strategy focused on competitiveness.
2. Investing at least 1% of agri-GDP in R&D and enhancing export value chains can help.
3. Developing agri-export hubs with APEDA’s support and targeting high-value commodities like bananas, mangoes, and pomegranates can expand export potential.
4. Effective negotiations and smart investments can turn Trump’s tariff threats into an opportunity for India’s agricultural growth. Question for practice:

Evaluate how India’s high agricultural tariffs impact its trade relations with the United States in light of President Donald Trump’s proposal for reciprocal tariffs.