Tariff shadow looms over Indian farmers

In the apple orchards of Rohru, a hundred-odd kilometres from Shimla, the capital of Himachal Pradesh, the apple trees have started to bloom, but orchard owners are far from cheerful. Their concerns are not about the flowers’ growth but the ongoing trade negotiations between India and the United States over tariffs. Reports that India may lower import duties on American products to avoid retaliatory tariffs have left farmers and orchard owners anxious. Their past experiences with tariff reductions have been unsettling.

In 2023, the government slashed the import duty on apples from 70 per cent to 50 per cent, leading to a 20-fold surge in imports of Washington apple. Simultaneously, the nonpremium apple market saw an influx of cheaper apples from Iran and Turkey, further squeezing domestic growers.

Lokinder Singh Bisht, president of the Progressive Growers Association, told National Herald that Indian farmers cannot compete with Washington apples in the premium segment as large-scale, factorylike farming in the US ensures uniformity in colour, shape and size. He added that with production costs rising sharply in India, further reductions in import duties could make apple farming economically unviable.

The tariff dispute between India and the US extends beyond apples. If President Donald Trump’s rigid stance on tariffs persists, India could face significant market disruptions after 2 April 2025.

The situation presents a dilemma for India—either face reduced exports if the US imposes higher duties on Indian goods or risk an influx of American products by lowering import tariffs. Signals from both New Delhi and Washington DC this week indicated that negotiations are yet to conclude and that the Indian side expects some relaxation.

However, the manner in which New Delhi has caved in till now, lowering import duties even before trade talks conclude, has unnerved agriculturists and experts alike. Agriculture is particularly vulnerable. India exports over $120 billion worth of goods to the US, with diamonds, bulk drugs, engineering products, textiles and readymade garments among the key products.

Agricultural products account for $48 billion of this total, whereas agricultural imports from the US are below $2 billion—even after India recently lowered tariffs on apples, cranberries, blueberries and Turkey. Any further tariff cuts or retaliatory measures from the US could significantly alter this trade balance.

The American export lobby has long pressured India to lower tariffs on agricultural products. US farm producer organisations have urged the US Trade Representative to push for steep tariff reductions. Since Trump took office, this lobby has gained momentum, with the President frequently labelling India the “tariff king”—a narrative that strengthens their cause.

Trump has repeatedly claimed that India imposes tariffs of up to 100 per cent on US goods, though this applies to only a few select products. On agricultural imports, India maintains an average duty of 39 per cent, though rates vary—50 per cent on apples and 60 per cent on dairy products, for example.

Meanwhile, Indian export organisations have also become active, seeking a middle ground to protect their business. In the fourth week of February, during commerce minister Piyush Goyal’s visit to Kochi for the Invest Kerala Global Summit, shrimp exporters met him and urged the government to abolish the 30 per cent import duty on shrimp.

Their concern is that if the US retaliates by imposing a similar 30 per cent tariff on Indian shrimp, prices in the American market will rise sharply, making them uncompetitive. Currently, the US imposes a 5.77 per cent countervailing duty on shrimp imported from India.

In 2023–24, India exported a total of 716,004 metric tonnes of shrimp, with the US being the largest buyer, importing 297,571 metric tonnes. The demand for India’s Black Tiger shrimp in the American market is steadily increasing. Notably, shrimp imports into India from the US or other global markets are almost negligible.

A similar challenge exists for several other Indian agricultural exports. Products like cashews, spices, mangoes and tea compete on price in global markets. They find strong demand in the US because they are relatively inexpensive for American consumers. However, these are not irreplaceable commodities—alternative sources are available in the international market.

The tariff issue could also disrupt exports where the US lacks viable alternatives. Take rice, for instance—India is the world’s largest rice exporter, particularly of basmati and other aromatic varieties, where American consumers have few substitutes. Despite this, India maintains a 70 per cent import duty on rice. If the US responds with a similar tariff, Indian rice exports could suffer due to rising prices and low demand.

On the other hand, reducing import duties to avoid a tariff war could create significant domestic problems. Consider walnuts: even now, India imports them in large quantities from the US. If import duties are lowered drastically—meeting American producers’ demands—cheap US walnuts could flood the market, severely impacting Indian walnut farmers. Since walnuts in India are primarily grown in hilly regions with limited alternative crops, this could have serious economic consequences for local producers.

The greatest threat lies in the potential influx of cheap, mass-produced American agricultural products into Indian markets. Unlike the US, where large-scale farming benefits from economies of scale, Indian agriculture is predominantly carried out on small landholdings. If low-cost American produce floods the market, it could create fresh challenges for India’s already struggling agriculture sector.

Farmers’ organisations have long warned that farming is becoming increasingly unviable—such a development could further deepen their losses.

There is also growing pressure to reduce import duties on cotton. India is currently the world’s largest producer and exporter of cotton. However, lowering tariffs could allow American cotton to disrupt the domestic market. The immense financial strain on Indian cotton farmers is evident from the unfortunate rise in farmer suicides in states like Punjab, Gujarat, and Maharashtra, where many of the affected farmers were engaged in cotton cultivation. Another key reason for the price disparity between Indian and American agricultural products is the massive subsidies provided to US farmers.

According to Harveer Singh of Rural Voice, who analysed data from the US Government Accountability Office, an average American farmer receives an annual subsidy of $30,782 (approximately Rs 26.78 lakh). In contrast, Indian farmers receive just Rs 6,000 per year under the PM-Kisan Samman Nidhi scheme, subsidised fertiliser and electricity, which is still far lower than the subsidies in the US. The tariff issue is not new. During the Manmohan Singh government, the then commerce minister Kamal Nath had summed up India’s position succinctly: “We have no problem competing with American farmers, but we cannot compete with the American Treasury.”

While Trump has been vocal about tariffs, he remains conspicuously silent on the massive subsidies American farmers receive. If India lowers import duties on US agricultural products, it won’t just open the market, it will effectively make Indian consumers and farmers bear the cost of America’s subsidy-driven agriculture. Until now, the trade balance between India and the US has favoured India, with exports surpassing imports. This equation could alter significantly after 2 April, when Trump’s so-called ‘reciprocal tariffs’ kick in.