Indian agriculture and dairy sectors are strong enough to withstand US tariff vagaries

The country is now aggressively seeking market access for its agri-products like rice, shrimp, spices, tea and coffee through its trade agreements and, in return, is willing to open up agriculture and food products selectively to FTA partners.

India is the world’s largest producer of food items like bananas, millets, pulses, chickpeas and mangoes, and ranks second globally in the production of citrus fruits, wheat, rice and cashew nuts. It maintains a positive agricultural trade balance with the US, UK and EU.

Therefore, India has taken the right decision to be an aggressive negotiator in the field of agriculture. Future trade negotiations must strike a balance between our export ambitions and the need to protect domestic farmers.

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To be sure, India has high import duties on agricultural products, much greater than the 50% tariff proposed by US President Donald Trump for Indian goods bound for the American market.

According to the World Trade Organization’s (WTO) World Tariff Profiles 2025, the maximum bound tariff on agriculture imports is 300% while the highest applied most-favoured nation (MFN) duty is 150%.

The United States Trade Representative’s (USTR) 2025 National Trade Estimate Report on Foreign Trade Barrier has identified many products—including vegetable oils (45% tariff), apples (50%), corn (50%), coffee, raisins and walnuts (100%) and alcoholic beverages (150%)—that US farmers are unable to sell in India because of high tariffs.

Not getting access to India’s large and growing market is a much bigger loss for US farmers than the loss of market access for Indian farmers, who face the same barriers and uncertainty as Brazil (and to an extent China).  

American farmers are under pressure. They are facing retaliation by China. In April 2025, China decreased its soyabean purchases from the US and cancelled orders of US pork and breeding pigs, pushing US farmers towards a long-standing crisis. American agri-exports are in limbo, with the US unable to sign a trade deal with a fast-growing economy and large market like India.

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India, on the other hand, has been reducing its tariffs on alcoholic beverages from the UK, apples from Australia, chocolates from Switzerland and many more from trade partners through various agreements. Instead of calmly seeking market access, US farmers may lose whatever access they have due to this tariff war.

If we look at the past record, India had reduced tariffs on apples from America, but the move was rolled back after the withdrawal of the Generalized System of Preferences (GSP) in Trump 1.0. Soon, Californian wines will be less price competitive compared to wines from Chile or Australia.  

Views of India’s dairy sector being defensive and backward are overstated. With strong government support, Indian dairy products are now globally competitive. In 2024-25, India exported about $273 million worth of dairy products, largely bulk items like butter.

At the same time, our imports have been low, possibly because of our high tariffs. Importantly, the US is not a dominant competitor in this sector, as it lacks cost efficiency or scale to pose a major threat. India’s main dairy rivals are New Zealand, Australia and the EU. 

India’s dairy trade with the US includes exports of casein (HSN 3501) and imports of whey protein (HSN 3502) and lactose (HSN 17), primarily. Thus, if India keeps fresh and skimmed milk out of the US negotiations, while considering a phased reduction in tariffs for sub-products such as GI cheese and chocolates, we can move ahead aggressively with the US.

If we anticipate increased imports of whey protein and lactose due to lower tariffs, a tariff-rate-quota (TRQ) mechanism could help manage the inflow. 

The Indian poultry sector is one of the largest in the world and growing at a rate of 5-7% annually, producing 9.5 million metric tonnes (MMT) of broiler meat and 330 million table eggs per day in 2024.

Though imports are minimal, producers are concerned about imports from the US of low-cost chicken legs and frozen whole chicken, which currently face tariffs of 100% and 30%, respectively. This concern can be addressed through a TRQ and phased tariff.   

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In soyabean oil, the US is not a strong player. India imports most of its soyabean oil from Brazil and Argentina. Even if tariffs are reduced, the US may still remain uncompetitive. India can import crude soyabean oil from the US by reducing tariffs, value-add and export processed soyabean oil to markets like China, which imports over 100 MMT annually. 

The story is not just about tariffs or a missed deal. It’s about the growing confidence of Indian agriculture. Indian agri-sectors have been competing globally and exporting, but they need a balanced trade deal. If we bring down the tariff for dairy or American apples and walnuts, our farmers should face lower tariffs on shrimp, rice, dairy, spices, tea, coffee and a range of horticulture exports.  

We also have to diversify our source countries. In almonds, the US is a major supplier, but we can import from Australia and the UAE with which we have trade agreements. In the current geo-political scenario, we must reduce dependence on any one country.  

Food prices in America are rising and its farmers are facing market access problems. If we delay the negotiations by a few months as the US festive season approaches, inflation in the US and the keenness of its farmers for market access may soften Washington’s position.

In the meantime, we can offer some support to select products that depend heavily on exports to the US without shifting our current position. Let’s focus on agriculture reforms to make the sector stronger and more competitive.

These are the authors’ personal views.

The authors are, respectively, professor and research intern, Indian Council for Research on International Economic Relations.