The recent proposal by US President Donald Trump to impose reciprocal tariffs is aimed at addressing the increasing US trade deficit and aligns with the broader “America First” policy. In 2024, the U.S. trade deficit surged to USD 918.4 billion, with India accounting for USD 45.7 billion of this imbalance. Trump has repeatedly criticized India’s high tariffs, referring it as a Tariff King. India imposes significantly higher tariffs than the US, particularly in agriculture where it imposes a simple average tariff of 39 per cent and a trade-weighted tariff of 65 per cent, compared to the U.S.’s 5 per cent and 4 per cent, respectively. Given this stark tariff disparity, the proposed reciprocal tariffs could have a substantial impact on India’s agricultural exports to the U.S., which is the largest trading partner of India.
This policy brief assesses the potential implications of reciprocal tariffs on India’s agricultural exports, analysing key trade trends, tariff disparities, and non-tariff barriers. While India has historically relied on protective tariffs to safeguard domestic farmers, retaliatory measures from the U.S. could reduce market access for Indian agricultural products. The challenge for India is to balance domestic agricultural interests while ensuring that trade relations with the US remain stable. Overall, it seems that in case of reciprocal tariffs in agriculture, India’s agri-exports to US may come down and its imports from US will go up, thereby reducing or even wiping out the agri-trade surplus.
To mitigate these challenges and sustain long-term export growth, India must transition from tariff-based protectionism to productivity-driven competitiveness. This brief outline three key policy recommendations: (i) phased tariff reduction on select outlier commodities, (ii) increased investment in agricultural research and development (R&D) to enhance yields and competitiveness, and (iii) strengthening agricultural value chains to boost exports. By adopting these strategies, India can navigate the evolving global trade environment while ensuring the resilience and growth of its agricultural sector.
