US-India Trade Relations and Tariff Policies
The discussion centers around US President Donald Trump's push for "reciprocal tariffs" aimed at reducing trade deficits, aligning with his broader "America First" policy. In 2024, the US trade deficit rose to $918.4 billion from $784.9 billion in 2023. The largest deficit was with China at $295.4 billion; India accounted for $45.7 billion.
US and India's Tariff Disparities
- General Tariffs: India imposes significantly higher tariffs than the US, with a simple average rate of 17% on all goods, compared to about 3.3% by the US.
- Trade-Weighted Tariffs: These further highlight the gap, with India at 12% vs. 2.2% in the US.
- Agricultural Tariffs: The disparity is most pronounced in agriculture, with India's simple average tariff at 39% and trade-weighted average at 65%, compared to the US's 5% and 4% respectively.
Impact on Agricultural Exports
The US is India's largest agri-export market, boasting a trade surplus of $3.46 billion in 2023-24. Key Indian exports include shrimp, basmati rice, processed foods, and honey. Conversely, US exports include almonds, cotton, ethanol, and soybean oil. Trump's tariff threats could:
- Make Indian agri-exports like shrimp uncompetitive.
- Increase US imports to India.
- Shrink or eliminate India's agri-trade surplus with the US.
Negotiation and Market Access
Cool-headed negotiations are essential for India to maximize gains through market access in sectors where it has a comparative advantage. India should consider lowering duties on goods the US wishes to export, such as:
- Whiskey (150% duty), walnuts, chicken legs (100%), skimmed milk powder (60%), wheat, soybean, and maize (40-50% duty).
Strategic Adjustments and Long-term Policy
- India should invest a minimum of 1% of its agri-GDP in R&D to remain competitive.
- Modernization of agri-value chains is crucial, including cold storage expansion and quality certification improvements.
- Key production clusters should be developed into agri-export hubs with APEDA's assistance.
India's agricultural trade can thrive in a reciprocal global market through smart negotiations and prioritizing investments over heavy subsidies. Trump's tariff threats offer an opportunity to shift from tariff-heavy trade protectionism to a productivity-driven export strategy for long-term gains.