Spare a lifeline for shrimp farmers reeling under US tariffs

This comes on top of existing anti-dumping and countervailing duties of approximately 8% on shrimp, pushing the total effective duty to 33%, which was just 7.5% before US President Donald Trump’s reciprocal tariff announcements of 2 April.

In recent years, Indian shrimp farming has shown an impressive performance. It grew at a compound annual growth rate of 18% between 2011 and 2023. This growth relied heavily on exports. Demand from the US has been a major driver of this increase. Consider the numbers.

In 2023-24, India exported over $2.5 billion worth of shrimp to the US, making up nearly 38% of America’s total shrimp imports, followed by Ecuador’s share of 21%, Indonesia’s 17% and Vietnam’s 11% (ITC data, 2024).

However, major competitors of India in the US shrimp market have secured far more favourable terms in terms of import tariffs. Ecuador currently faces an effective duty of 18%, Indonesia’s rate has dropped from 35% to 25.3% and Vietnam’s has been reduced from a steep 46% to 20% following recent negotiations by these countries with the US.

In contrast, India now faces an effective tariff of 33%, creating a 14 to 15 percentage point disadvantage compared to Ecuador, its closest competitor in US market. The widened tariff gap risks diminishing India’s competitive edge and reducing its market share in the US, which would put pressure on Indian exporters, processors and farmers.

India’s ‘revealed comparative advantage’—a measure of a particular good’s concentration in a country’s export basket in relation to its share of world trade—in shrimp exports is 4.4, lower than Ecuador’s 16.0, highlighting Ecuador’s stronger specialization and rapid growth through vertical integration.

India primarily exports raw frozen shrimp, which make up about half of US imports. In 2024, India’s average landing price in the US of this export was $7.69 per kg, compared to Ecuador’s $7.06. Despite higher freight charges, India’s cost advantage was on account of labour-intensive peeling and processing. However, the recent 25% US tariff threatens this competitiveness.

Prepare for rising costs and shrinking margins: Even before this tariff increase, Indian shrimp farmers were facing lower profits due to high input costs. Shrimp feed, which makes up nearly 60% of total production costs, has seen the highest rise.

Global inflation in feed ingredients like fishmeal and soybean, along with the depreciation of the rupee and supply chain glitches, has pushed feed prices up by 25-30% in the last three years.

For small and medium farmers culturing Litopenaeus vannamei (white leg shrimp), the average production cost has risen to about ₹280- ₹300 per kg. However, with average farm-gate prices ranging between ₹340 and ₹360 per kg, profit margins have shrunk. If farm-gate prices drop below ₹280 per kg, many businesses incur losses.

Indian processors are currently delivering past export orders, as the peak harvest and export period is on, with stocking underway in export destinations for a festive demand bounce. With the new American tariff rules, exporters may need to absorb the extra cost burden, reducing their margins.

The impact will percolate to farmers, who are already operating on low margins. It will hit farmers in Andhra Pradesh the hardest as they account for over 82% of India’s total shrimp production, followed by those in states like Odisha, West Bengal, Tamil Nadu and Gujarat.

The impact is not limited to coastal areas. Under the Union government’s Pradhan Mantri Matsya Sampada Yojana, inland saline aquaculture is being promoted in inland states like Haryana and Punjab. These states are converting salinity-affected lands into productive aquaculture zones.

Inland farmers, many of whom are new to shrimp farming, are now facing uncertainty just as they begin to expand operations. If farm-gate prices fall due to an export disruption, it could stall progress in these emerging aquaculture areas.

What can be done in response: The Indian shrimp industry’s hope is of lower tariffs through negotiations. But if high US tariff rates persist, India must treat this trade shock as a wake-up call to diversify export markets, increase production efficiency and boost domestic demand for shrimp.

There is an urgent need to diversify India’s shrimp export markets beyond the US, with a greater focus placed on East Asia, the EU, UK and West Asia. The India-UK Comprehensive Economic and Trade Agreement offers a timely opportunity to boost shrimp exports to the UK by leveraging the pact’s tariff advantages.

India’s Marine Products Export Development Authority can play a key role in branding Indian shrimp and facilitating market development abroad.

Also, the farmers’ access to institutional credit and insurance must be improved. Small farmers often struggle with working capital constraints and shrimp crop insurance schemes need to be scaled up with transparent and efficient claim-settlement mechanisms.

Boosting domestic consumption is no less critical. Shrimp could be mainstreamed into Indian non-vegetarian diets through awareness campaigns of its nutritional value. Our growing market for ready-to-eat and ready-to-cook food is likely to welcome it.

These are the authors’ personal views.

The authors are a fellow and a research associate, respectively, at the Indian Council for Research on International Economic Relations (ICRIER)