Trump’s tariff talk will target the farm sector
Washington is likely to ask Delhi to reduce tariffs on US farm products. India needs to protect its farm sector to ensure food security and protect livelihoods
During the two months since Donald Trump’s decisive victory at the hustings, the incoming administration has repeatedly hinted at the disruptions the global economy will have to face due to recalibration of the United States (US)’s policies vis-à-vis its major partners. Within weeks of being assured of a second term as the US president, Trump announced his decision to increase tariffs on imports from Canada, China, and Mexico immediately after his inauguration. India escaped being among the targeted countries even though the President-elect had consistently railed against India’s relatively higher tariffs, labelling India as the “tariff king”. However, not too long after this, Trump announced that his administration would impose “reciprocal tariffs” on India arguing, “[I]f they tax us, we tax them the same amount. They tax us. We tax them. And they tax us. Almost in all cases, they’re taxing us, and we haven’t been taxing them”. He elaborated in typical Trump fashion, “If they want to charge us, that’s fine, but we’re going to charge them the same thing”. Trump’s commerce secretary pick, Howard Lutnick, emphasised that “reciprocity” is something that is going to be a key topic for the Trump administration. This intent of the incoming administration was hardly surprising as the President-elect had underlined on his campaign trail that “the most important element of [his] plan to make America extraordinarily wealthy again is reciprocity”.

How will the Trump administration’s penchant for “reciprocity”, a policy that was practised by the mercantilists in the Middle Ages, affect the future of India-US trade relations? The imposition of higher tariffs could significantly impact India’s exports to its largest trading partner, which, for the first time, is accounting for ~19% of India’s total exports in the current fiscal.
Facing the highest risk of being targeted by the new American administration’s policy of “reciprocity” is India’s agriculture. There are two reasons for this. One, the US is the world’s largest exporter of agricultural commodities, valued at $179 billion in 2023. And two, the share of agricultural products in India’s imports from the US has been just 3-4% in recent years. Successive administrations have repeatedly highlighted India’s low share in the US’s agricultural exports and have urged the Indian government to improve market-access opportunities through a slew of measures, including the reduction of tariffs.
The US department of agriculture (USDA) has identified cotton, dairy products, ethanol, fresh fruit, forest products, processed food and beverages, pulses, and tree nuts as the top agricultural products having substantial prospects for US exporters in India. The department argues that India impedes agricultural trade with high tariffs and non-tariff barriers. India applies tariffs ranging between 30-40% on most agricultural and consumer-ready food products and retains the flexibility of raising agricultural tariffs to as high as 150% without violating its commitments to the World Trade Organization (WTO). The USDA also contends that the Indian government regularly enacts sanitary and phytosanitary measures and other non-tariff barriers, particularly in the biotechnology space, that are not based on science- or risk-based approaches.
India has routinely defended its relatively high tariffs in agriculture stating that it needs to provide adequate levels of protection to its farming communities from the highly subsidised products dumped by producers in advanced countries, including the US. In this context, it must be pointed out that most agricultural producers in the US do not need tariff protection as high doses of subsidies allow them to sell their products below international prices. Thus, the US can always boast of not imposing tariffs on agricultural products while it facilitates the dumping of agricultural products by its producers in the global market.
Moreover, India has argued that its agriculture is largely aimed at meeting the food security needs of the country’s population, which was diametrically opposite to the objectives of a market-oriented US agriculture. Lowering tariffs and exposing India’s small and marginal farmer-dominatedagriculture to US farm products would put at risk not only the hard-earned domestic food security but also a significant share of livelihoods dependent on agriculture.
Trump’s first term in office was marked by the beginning of sustained pressure on India’s agricultural subsidies. Along with several agricultural exporting countries, the US has been arguing since 2018 that the level of subsidies India provides to its major staples, rice, and wheat, far exceed the level it is permitted to under WTO rules. Questioning India’s agricultural subsidies continued during the Biden presidency as Congressmen joined the fray. Early last year, Senator Ron Wyden, chairman of the Senate Committee on Finance, insisted that India’s wheat subsidies were distorting prices and directly hurting American farmers who were unable to compete in the Asian market. Under these testing circumstances, the Indian government would have to maintain its resolve to protect the interests of the country’s farmers, especially after the second Trump administration takes charge in Washington.
Much like his antipathy for tariffs, Trump has been deeply resentful of foreign workers entering the US with H-1B visas. In 2017, as president, he signed an executive order, the Buy American and Hire American Executive Order seeking to create higher wages and employment rates for US workers, ostensibly to protect their economic interests by rigorously enforcing and administering the immigration laws. This resulted in increased scrutiny of H-1B visa applications with rejection rates reaching an all-time high of 24% in 2018. As a presidential candidate last year, Trump sounded equally hawkish on the immigration issue, receiving considerable support from his conservative base.
However, after Trump chose tech entrepreneurs Elon Musk and Vivek Ramaswamy to join his cabinet, the President-elect’s views on the presence of foreign workers in the US seem to have changed significantly. “We need smart people in our country”, he opined, “we need a lot of people coming in”. Though Trump’s change of heart has split the Republicans, this augury will please India as around 72% of H-1B visas were issued to its nationals during 2022-23. Such a change of heart or even a slight relaxing of his tariff-reciprocity stance, however, looks doubtful.
Biswajit Dhar is distinguished professor, Council for Social Development.The views expressed are personal
