Higher tariff on competitors to shield India’s farm exports to US: Experts

Trump unveiled a reciprocal tariff on all imports into the country in what he said was a bid to create a level playing field for Washington.

India’s agricultural produce exports to the US are expected to experience a lower-than-expected impact from the tariffs Donald Trump announced on ‘Liberation Day’, as the US president termed it. That’s because India’s primary rivals including Vietnam and Thailand have been hit with a higher tariff, experts told Moneycontrol.

On April 2, Trump unveiled a reciprocal tariff on all imports into the country in what he said was a bid to create a level playing field for Washington. Trump slapped a 10 percent baseline tariff on all countries, with higher levies on select countries, including the 26 percent imposed on India. In comparison, the US levied duties of 46 percent on Vietnam, 36 percent on Thailand and 29 percent on Pakistan.

Vietnam and Thailand are among the main competitors to India when it comes to farm exports to the US.

“The way to look (at the reciprocal tariff) is to not just look at our tariff but also what the tariffs are on our competitors for these commodities. For example, if you take rice, our tariff will go up to 26-27 percent. But then our biggest competitors are Thailand, Vietnam, Pakistan, and tariffs on those three countries are even higher than ours. So we will have a comparative tariff advantage. And, therefore, even with higher tariffs, we can push for higher exports,” Ashok Gulati, agricultural economist and former chairman, Commission for Agricultural Costs and Prices, told Moneycontrol.

Unveiling new tariffs, Trump said reciprocal tariffs would be very “kind” compared to what other nations charge the US.

He added that India is "very, very tough" when it comes to tariffs. "PM (Narendra) Modi, he just left, he's a great friend of mine, but I said you're a friend of mine, but you're not treating us right. They charge us 52 percent," Trump said, referring to the prime minister's recent visit to the US. Trump has repeatedly criticised India’s high duties, especially on automobiles and agricultural goods, labelling the country as a "Tariff King" on his social media posts.

Experts point out that preliminary observations suggest that India’s exports of farm products such as seafood and cereals to the US would be the hardest hit.

“We will have to see what will happen to the exports from Vietnam, Thailand, etc. But seafood exports will take a hit...and exports of cereals, basmati rice will also be hit,” said Siraj Hussain, former agriculture secretary.

The simple average tariff for agricultural goods in India is 39 percent, starkly higher than the US rate of 5 percent, which remains a significant concern for the Trump administration. India imposes higher tariffs on agricultural products to protect the sector as the country’s farm and allied sectors employ 46 percent of the population.

India had a trade surplus with the US of $3.46 billion in agriculture in 2023. India’s key exports to the US included frozen shrimp and prawns, basmati and non-basmati rice, vegetable saps and extracts, natural honey, and processed food products, according to an Indian Council for Research on International Economic Relations report.