Indian agricultural exporters are experiencing a significant boost following the decision by US President Donald Trump to exempt numerous food items from his ‘reciprocal tariffs’ regime.
This policy change has been widely viewed by market analysts as a potential catalyst for revitalising lost market demand for Indian agricultural produce in the United States.
The exemption applies to dozens of specific food products, which offers a tangible benefit to the Indian export community, allowing them to compete more favorably in the American market without the added burden of retaliatory duties.
For a sector that has faced pressures from international trade disputes and fluctuating global demand, this move provides a much-needed lifeline.
Increase in volume and value likely
Analysts suggest that the removal of these tariffs could lead to an immediate and measurable uptick in the volume and value of agricultural exports from India to the US, according to a Reuters report.
This is crucial for India, where agriculture remains a cornerstone of the economy, supporting a vast population.
The revival of demand is expected to benefit various stakeholders, from large-scale exporters to smallholder farmers whose produce constitutes the raw material for these exports.
Furthermore, the positive trade environment could encourage greater investment in India’s agricultural supply chain, improving infrastructure and efficiency to meet renewed US demand.
Facing increasing consumer concern over rising US grocery prices, Trump on Friday lifted tariffs on over 200 food products, including beef.
Indian exporters of goods such as tea, coffee, spices, and cashew nuts were significantly impacted after the US, under Trump, doubled tariffs on certain Indian imports to as high as 50%.
This increase was more severe than the 15–20% duties faced by suppliers from the EU and Vietnam.
Furthermore, Indian businesses were also affected by a punitive 25% levy, imposed from the end of August, specifically targeting India’s purchases of Russian oil.
According to Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO), tariff exemptions will benefit Indian exports valued between $2.5 billion and $3 billion.
Positive talks
“This order opens space for premium, specialty and value-added products,” Sahai said.
Exporters who shift towards higher-value segments will be better protected from price pressures and can tap rising consumer demand.
The exemptions are viewed by officials engaged in trade and farm export policy as a positive indicator for the ongoing trade discussions between the US and India.
Furthermore, they are expected to alleviate export challenges stemming from this year’s tariff hikes.
Following the increase in tariffs, Indian goods exports to the US declined by nearly 12% year-on-year in September, totaling $5.43 billion.
Among the sectors affected were Indian farm exports, which are projected to contribute $5.7 billion to the country’s total $87 billion of exports to the US in 2024.
Ajay Srivastava, founder of the Global Trade Research Initiative think tank, suggested that the potential increase in India’s agricultural exports to the US would be marginal.
This is due to India’s focus on a limited range of high-value spices and niche products, coupled with a weak market presence in key exempt categories like bananas, melons, tomatoes, citrus fruits, and fruit juices.
“The tariff shift would marginally strengthen India’s position in spices and niche horticulture and help revive some lost US demand after the tariff hikes,” Srivastava was quoted in a Reuters report.
While Latin American, African, and ASEAN suppliers anticipate greater benefits, uncertainty remains regarding whether Indian exports will be subject to a 25% reciprocal tariff or the full 50% tariff.
Despite potential gains, exporters are concerned about limiting factors such as elevated freight costs, intense competition from Vietnam and Indonesia, and stricter US quality standards.
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