US President Donald Trump’s latest push for “reciprocal tariffs” is aimed at reducing trade deficits and aligns with his broader “America First” policy. In 2024, the US trade deficit had surged to $918.4 billion, from $784.9 billion in 2023. The largest deficit was recorded with China at $295.4 billion, while India accounted for only $45.7 billion. Trump has, however, frequently criticised India’s high tariffs and trade barriers on American goods, referring to India as the “tariff king”. During Prime Minister Narendra Modi’s recent US visit, Trump reiterated that India would not be exempt from these proposed tariffs, which are designed to match the import tariffs that other countries impose on US goods.
We don’t know yet whether these reciprocal tariffs will be on all goods or sector by sector or commodity by commodity. But it is better to prepare for the worst, and hope for the best. According to WTO data, India imposes significantly higher tariffs than the US, with a simple average rate of 17 percent on all goods, compared to about 3.3 per cent imposed by the US (see graphics). The trade-weighted tariffs further highlight this gap — 12 per cent in India vs. 2.2 per cent in the US. However, the most striking difference is in the agriculture sector, where India’s tariffs are notably higher — the simple average tariff being 39 per cent, and trade-weighted average being 65 per cent. In comparison, the US maintains relatively low agricultural tariffs with a simple average of 5 per cent and a trade-weighted rate of 4 per cent. Given this stark tariff disparity in agri-products, the proposed reciprocal tariffs could have a substantial impact on India’s agricultural exports to the US — its largest trading partner.
The US is India’s largest agri-export market, giving a trade surplus of $3.46 billion in 2023-24. Key Indian exports include shrimp, basmati rice, processed foods, and honey, while the US exports to India include almonds, cotton, ethanol, and soybean oil. If Trump’s tariff threats materialise, Indian agri-exports — especially duty-free items like shrimp — could become uncompetitive, while imports from the US may rise. This could shrink or even erase India’s agri-trade surplus with the US. Thus, cool headed negotiations are important for India to maximise its gains by asking for market access of a number of agri-commodities where India has comparative advantage, and lowering duties on others where US may like to export to India. US interests are exporting whiskey, which attracts 150 per cent duty in India, walnuts and chicken legs attracting 100 per cent duty, skimmed milk powder (SMP) attracting 60 per cent duty, wheat, soyabean, and maize, which attract 40 per cent, 45 per cent, and 50 per cent import duty in India, besides non-tariff barriers of GM crops in India.
While India has adopted Bt cotton, and its by-products such as GM cotton seed oil and cotton seed oil cake, which is used as feed, it continues to ban GM soy and maize, despite growing domestic demand for high-protein animal feed and ethanol production. This restrictive trade policy has frustrated the US, which remains a global leader in GM crop production with high yields.
The challenge for India is to strike a balance between protecting its farmers and keeping its most lucrative export market open. India and the US are already holding discussions for a broader trade agreement with the ambitious “Mission 500” which aims to boost bilateral trade to $500 billion by 2030. There is much scope for increasing India’s agri-exports to the US, provided India gets market access. Food preparations, butter, bovine meat cuts, all attract more than 20 per cent import duty in the US. These can be negotiated to lower levels provided India is also ready to lower its import duties. Our analysis shows that Indian agriculture is quite competitive and its exports can increase provided export policy remains open. Many fruits and vegetables ranging from bananas to okra have export potential. But it will require streamlining their export value chains.
India has been open to selective concessions. For instance, in Washington apples (from 50 per cent to 15 per cent). A phased tariff reduction in food preparations (currently at 150 per cent), walnuts (100 per cent), cut chicken legs (100 per cent), and dairy products such as cheese and skimmed milk powder (30–60 per cent) should be implemented, particularly as US is keen on pushing these to Indian markets. While tariffs on commodities like walnuts, cranberries, and blueberries can be reduced immediately, products where domestic producers remain competitive, such as poultry (cut chicken legs), should undergo gradual tariff reductions.
Tariff concessions are like a band aid in the short-term. In the medium to long term, we need to set our house in order. First, R&D investments is one major action. Currently, central and state agricultural investments together remain below 0.5 per cent of agri-GDP, far lower than global comparisons. India must invest at least 1 per cent of its agri-GDP in R&D, ensuring that exports remain competitive rather than dependent on trade protection. Second, India must modernise its agri-value chains including expanding cold storage capacity, upgrading logistics infrastructure, and ensuring better quality certification and traceability. Key production clusters must be developed to agri-export hubs with the help of APEDA to boost India’s agri-export potential in high-value horticultural commodities (banana, mango and mango pulp, pomegranates in markets like Russia, Korea, Japan, Australia).
India’s agricultural trade can grow in an increasingly reciprocal global market if we negotiate smartly and prioritise our investments that make agriculture more competitive rather than leaning towards heavy subsidies as in the case of fertilisers and free power. Trump’s tariff threats should be a wake-up call for India’s agricultural policymakers. If handled wisely, it could be an opportunity to transition from tariff-heavy trade protectionism to a more resilient, productivity-driven export strategy — one that ensures long-term gains for Indian farmers and exporters alike.
Gulati is distinguished professor, Wardhan is fellow and Rao is senior fellow at ICRIER. Views are personal
India’s agricultural trade can grow in an increasingly reciprocal global market if we negotiate smartly and prioritise our investments that make agriculture more competitive rather than leaning towards heavy subsidies as in the case of fertilisers and free power. (Illustration by CR Sasikumar) 
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