India can grant more market access to some US farm goods to blunt any reciprocal tariff impact: Ashok Gulati

India had a trade surplus of $3.46 billion in agriculture in 2023, with key farm exports to the US include frozen shrimp and prawns, basmati and non-basmati rice, vegetable saps and extracts, natural honey, and processed food products, as per a report by Indian Council for Research on International Economic Relations (ICRIER).

US President Donald Trump’s reciprocal tariffs plan is expected to significantly affect India’s agricultural sector given the wide difference between the average duties levied by the two nations on farm produce.

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.

Given this, experts advocate granting access to certain US farm products via lower tariffs to protect Indian agriculture from Trump’s reciprocal plan.

“At present, we are surplus in agricultural exports to the US. If they (the US) put reciprocal tariffs on agriculture, the surplus will be wiped out. But we could play our cards smartly and give them some access through tariff quotas and then ask for market access. Because their duty structure is very low but market access is a problem,” Ashok Gulati, agricultural economist and former chairman, Commission for Agricultural Costs and Prices, told Moneycontrol .

India had a trade surplus with the US of $3.46 billion in agriculture in 2023. The 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.

“I do not think India will agree to reciprocal tariffs on agricultural produce. There are certain items, though, that can be considered for lower duty, such as nuts, certain fruits like berries, et cetera,” said Siraj Hussain, former agriculture secretary.

The US is set to impose higher tariffs from April 2 on countries that levy steeper duties on American goods under its Fair and Reciprocal Plan. Trump has repeatedly criticised India’s high levies, especially on automobiles and agricultural goods, labelling the country as a "Tariff King" on his social media account.

Though the US has levied steeper duties on the likes of Canada, Mexico and China, it is yet to specifically target India. However, in the run-up to the April 2 deadline for reciprocal tariffs, America has repeatedly called for New Delhi to open up its agriculture sector. Agricultural products accounted for 7 percent of the US’ total imports and 9 per cent of total exports over a three year-period until 2023.

Gulati said that the US may want India to lower tariffs on Californian almonds, which is America’s biggest export to India, and currently attract an import duty of 10-15 percent.

Gulati also sees room to reduce import duties on walnuts from the current 100 percent. “They (the US) will ask you to bring that down to 10-15 percent. They will also ask India to bring down duty on cranberries and blueberries,” he added.

While New Delhi has traditionally kept agriculture out of talks with other nations, the US’ reciprocal plan may push India to cut duties on certain farm produce while negotiating the first tranche of a bilateral trade agreement with the US by the autumn of 2025.

Engineering Export Promotion Council India Chairman Pankaj Chadha had earlier said that India could lower tariffs on US goods such as apples, chickpeas and walnuts, among others, and use it as a part of its reciprocal playbook. “This is where we can bargain, we can go up and down on duties, that’s how we can leverage this situation, by basing the trade deal on reciprocity,” he explained.

The US primarily exports soybean, maize, wheat and rice, largely to China, Mexico, the European Union and Japan, while major imports include alcoholic beverages, bananas and other fruits and berries.

Gulati said the big-ticket items on which India may be expected to reduce tariffs would be corn and soybeans.

“They (US) have been exporting a large quantity (of soybean) to China. Now, China has put a retaliatory tariff of 15 percent on soybean imports from the US. So they (the US) will knock on our doors. We have a duty of 45 percent on soybean,” added Gulati.

Earlier this month, in response to a US move to levy an additional 20 percent on goods from China and Hong Kong, Beijing had retaliated with its own extra duties of up to 15 percent on imports of key American farm products, including chicken, pork, soy and beef.

As the trade war between the US and China escalates, experts say India has to balance the demands from the US and the threat from reciprocal tariffs while also protecting its domestic farm sector.

Red lines

Agriculture is a sensitive sector for India, where the tariff structure could be as high as 150 percent for certain items.

“It would be difficult for India to agree to a very low tariff on dairy and poultry,” Hussain said.

In 2021, India dropped out of the Regional Comprehensive Economic Partnership free trade agreement involving the Association of Southeast Asian Nations, citing its negative effects on farmers and the dairy sector.

While lowering duties on certain farm commodities would favour New Delhi, protecting employment-sensitive sectors such as dairy and poultry is also expected to be high on the government’s priority list.

Ashwani Mahajan, national co-convener of the Rashtriya Swayam Sangh-affiliated Swadeshi Jagran Manch (a political and cultural organisation), had said that given livelihood concerns, India should exclude dairy and farm products from its trade negotiations with the US.

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.