us-india trade: tariff tensions threaten agricultural exports

2025-02-24 general

Washington, Monday, 24 February 2025.
trade barriers are hampering agricultural trade between the us and india, despite india’s growing demand for high-value agricultural products. india’s average tariff is 39 percent, while the us has an average of only 5 percent. a new analysis shows that india’s gdp may take a 0.1 to 0.6 percent hit due to proposed us tariffs. the elimination of tariffs could significantly boost us exports to india, especially for tree nuts, fresh fruit, and distilled spirits. both countries are now evaluating reducing these restrictions to boost commerce.

tariff impact on agricultural trade

The U.S. is currently India’s fifth-largest supplier of agricultural products [1]. However, trade barriers limit bilateral trade [1]. A gravity model analysis indicates that eliminating tariffs would significantly boost U.S. exports to India [1]. This would also lower Indian domestic prices, especially for tree nuts, fresh fruit, and distilled spirits [1]. Investors should monitor these potential shifts as they could influence the profitability of U.S. agricultural exporters and Indian consumer markets.

reciprocal tariffs and gdp impact

President Trump is considering reciprocal tariffs, potentially impacting India’s GDP [3][7]. Goldman Sachs estimates India’s GDP may decrease by 0.1 to 0.6 percentage points due to these tariffs [7]. India’s domestic activity exposure to U.S. final demand is approximately 4.0 percent of its GDP [7]. This exposure increases the potential domestic GDP growth impact [7]. Investors need to assess the vulnerability of Indian firms with significant U.S. exposure.

sector-specific vulnerabilities

Certain Indian sectors are particularly vulnerable [3]. Fish, meat, and processed seafood exports, totaling $2.58 billion, could face a 27.83% tariff differential [3]. Processed food, sugar, and cocoa exports worth $1.03 billion may struggle with a 24.99 percent tariff increase [3]. Edible oils, with $199.75 million in exports, face a 10.67 percent tariff [3]. Alcohol, wines, and spirits face the highest tariff hike at 122.10 percent, although exports are only $19.20 million [3]. Investors should consider diversifying portfolios away from these high-risk sectors.

india’s strategic response

New Delhi is considering tariff reductions on U.S. products [3]. This action is seen as a tactical move to preempt further U.S. trade actions [4]. India aims to double bilateral trade to US$500 billion by 2030 and seal a trade deal by fall 2025 [4]. These negotiations and potential tariff adjustments could present opportunities for strategic investments in sectors poised to benefit from improved trade relations [4]. The Modi government’s strategy balances trade liberalization with domestic interests [4].

tesla’s india entry and trade dynamics

Tesla is making preparations to start selling electric cars in India, which could signal a broader effort to reduce trade barriers [5]. President Trump is pushing Mr. Modi to loosen India’s trade barriers on auto imports [5]. Tesla is pursuing leases for large commercial spaces in New Delhi and Mumbai [5]. This development highlights the potential for increased foreign investment and market access, which could positively influence investor sentiment [5].

asia trade realignment

President Trump is using tariffs as a weapon, with Asia as a primary target [8]. Tariffs already announced on autos, semiconductors, energy, and pharmaceuticals account for a quarter of total Asian exports [8]. A recent economic trade zone between Singapore and Malaysia has attracted U.S. and Chinese companies that can no longer manufacture in China due to tariffs [8]. Investors should monitor the evolving regional supply chains and consider opportunities in countries benefiting from trade diversion [8].

Bronnen

trade barriers india us