Farming Trump's Tariffs In India

At 39 per cent, India’s simple average tariff on agricultural imports is far higher than the US's. The trade-weighted average is 65 per cent. Conversely, the USA has significantly lower agricultural tariffs, with a simple average of 5 per cent and a trade-weighted rate of 4 per cent, according to World Trade Organisation (WTO) calculations.

No wonder, India’s agricultural sector is under the lens of the United States Trade Representative (USTR) office. In its latest 2025 Foreign Trade Barriers Report in March, agriculture, along with dairy and meat production, is the most frequently mentioned sector in the India section.

India’s WTO-bound tariff rates on agricultural products are one of the highest in the world, averaging 113.1 per cent and ranging as high as 300.0 per cent. A bound tariff rate is the maximum (or the ceiling) most-favoured-nation (MFN) tariff a country can impose on any other WTO member country.

India is a country with roughly half of its population still surviving on agriculture and allied activities. So, protection of Indian agriculture has been a constant battle within various rounds of WTO negotiations. The high agricultural bound tariff rates are a result of that. Unfortunately, these historical gains now mean very little with the WTO itself in a comatose state.

Though the USTR mentions the WTO-recognised bound tariffs for India, the Trump administration is practically trying to lower those. Bilateral parleys are seemingly the only option.

What Is USTR Accusing India Of?

In the first leg of the trade war under Trump 1.0, reacting to unilateral American tariffs on Indian steel and aluminium, India had applied retaliatory tariffs on US-originating agri-products like chickpeas, lentils, almonds, walnuts and apples. The dispute was finally resolved under the Biden administration, and India rescinded the import duties in July 2023.

If Indian agriculture has been kept fully open to international imports, the volatility of global food prices and fluctuations in domestic production would have made Indian farmers susceptible to any sudden drop in agricultural prices.

Therefore, the subsistence issue in agriculture compels India to apply surcharges on agricultural imports. The rates also change from time to time, depending on the food security concerns of the country. Since 2018, a 10 per cent surcharge has been applied on imports.

The USTR also highlights quite a few so-called “non-tariff barriers”. However, most of these are not strictly non-tariff barriers, but import restrictions (imposed due to various reasons) and are mainly related to the “ease of doing trade”.

For example, imports of tallow, fat and oils of animal origin are banned. Apart from economic justifications, there is also a cultural angle to these kinds of restrictions.

The US side is also pushing for the elimination of Indian agricultural subsidies in various forms, including the minimum support price (MSP). This is ironic. The country, which once subsidised its farmers not to produce, is now pressing for a subsidy cut in a developing country with around half its population surviving on similar subsidies.

American grudges on import licensing requirements, customs barriers and trade facilitation — particularly in agriculture — are out in the open now. The USTR objects to too many inspections and illogical compliance requirements.

If the current push from the US results in simplifying some of these trade procedures, then that would be one of the rare gains for India in this episode.

Which Products Are At Stake For Both?

In the prelude to the current bouts of bilateral trade talks, India in February unilaterally slashed tariffs on bourbon whisky to 100 per cent from 150 per cent. However, it seems that this gesture failed to elicit any warmth on the US side.

Major agricultural exports of the US include wheat, soybeans, corn, tree nuts, fruits, vegetables and livestock products. India’s soybean consumption is high, and it is the fifth-largest global producer.

Earlier, China was the biggest importer of soybeans from the US. However, with the intensification of the trade war, China is bound to erect trade barriers on American exports like soybeans. So, a potential lowering of tariffs by India can flood Indian markets with cheap American soybeans, making Indian farmers vulnerable in the long run.

The 50 per cent duty on fresh apples was recently reduced to 15 per cent, following negotiations. Skimmed milk powder (SMP) still attracts a 60 per cent tariff, making imports unviable, despite India's domestic demand fluctuations.

In the broader category of dairy and livestock products, the US is a major exporter. The USTR is actively pushing for relaxations in the milk and dairy exports segment. India is one of the largest dairy markets in the world.

Cut chicken legs, a product that the US has long sought market access for, faces a 100 per cent tariff.

India’s exports of frozen shrimp and prawns, one of its largest agricultural exports to the US, enter duty-free, while preserved shrimp faces a 5 per cent tariff.

India’s fish and other marine product exports are its largest agri-export to the USA. Though Indian exports in this category have dwindled to US$ 1.9 billion in 2023-24, from a sizeable US$ 2.7 billion in 2021-22, fish and marine products are the biggest product category at stake for India.

If we add up all Indian exports of preparations of meat, fish and other marine products, which stood at US$ 585 million in 2023-24, it becomes evident that aqua and marine exports are the biggest export area at stake for India in agriculture.

Coffee, tea and spices are the next Indian exports likely to get affected. In 2023-24, Indian exports of these products to the US were valued at around US$ 392 million.

Whither Trade Policy?

Overall, at the end of this trade tussle, India’s agri-exports to the US may come down, and its agri-imports from the US may rise, reducing or even wiping out the country's agri-trade surplus with the US.

Indeed, an overhaul of the Indian trade ecosystem is long overdue. Phased tariff reduction on select outlier commodities, increased R&D investment in agriculture, strengthening agricultural value chains, and finding new agri-export destinations are some of the oft-repeated measures prescribed.

However, effectively taking up these policies requires significant time. The suddenness and brazenness of the current turmoil around tariff threats and trade retaliations do not allow such flexibility for a country like India.

The job of the Indian government is cut out for the time being. It has to navigate the evolving global trade environment, while ensuring the resilience and growth of its agricultural sector.