Agri-Trade in Trump 2.0: India needs to get ready for a tough bargain with the US

The US is the largest exporter of agri-products exporting over $175 billion accounting for 8.5% share in world agri exports, despite the fact that only 1.2% of its population is employed directly in farm-related activities and contributes to merely 5.6% in its total Gross Domestic Product (GDP). 

India has a positive trade balance with the US in agri-trade as it exported $5.1 billion of agri-products to the US in 2023, while it imported $1.4 billion in the same period. India’s major exports to the US include prawn and marine products, rice, coffee, tea and spices, gum, resins, and other vegetables, medicinal plants, while India’s major agri imports from the US include almonds in shell, undenatured ethyl alcohol, almonds, walnuts, cashew, apple, and pistachio, among others.

Donald Trump coming to power with massive support for his ‘America First’ slogan that captivated the imagination of millions of voters who endorsed his ideology to Make America Great Again. Transforming the economy and raising economic well-being of the masses indeed mesmerized the voters especially in the American hinterland. In quest of rapid economic gains, Trump’s trade doctrine is based on the basic mercantilist theory: the US should export more and import less, axe trade deficits and create huge trade balances as early as possible. 

Despite modern trade theorists and researchers preaching free trade to the rest of the world, most people in the US believe that free trade is indeed detrimental to the interest of the common US citizens and Trump made no mistake in understanding the pulse of the people and capitalized on the same despite stiff resistance from modern-day economic pundits and their global influence. 

In months to come, the US is likely to act disregarding multilateral systems such as WTO whose foundation is based on reduction of tariffs, removal of non-tariff barriers, and applying uniform tariffs under its MFN (most favoured nation) treatment. Trump has already declared that he is going to raise the tariffs to 10–20% for imports and much higher at 60% or more for imports from China. Moreover, tariffs up to 100% could be laid on imports from countries that do not trade in US dollars. However, the fact remains that the US, despite being a consistent crusader of free trade imposes exorbitant import tariffs on agriculture products such as cereals and food preparations (193%), oilseeds, fats and oils (164%), dairy products (188%), beverages (150%) fruits and vegetables (132%), and may more, as reported by WTO’s World Tariff Profiles 2023. 

Trump openly identifies himself a ‘tariff lover’ whereas he had earlier accused India as the ‘tariff king’. It seems in Trumps’ scheme of things, hard negotiations and bargains based on the give and take are likely to be the order of the day. India with its 1.42 billion population and world's fastest growing large economy is highly fascinating to the US which is the world's largest agricultural exporter. India is among world’s major importer of US tree-nuts, such as almonds, walnut and pistachio besides apples, edible oils and pulses. 

Though the US perceives India as an alternative major economic and strategic partner amid its long persisting trade conflict with China, India may benefit in terms of US investment and trade. However, the US is likely to use stiff pressure tactics to reduce tariffs and provide market access for dairy and meat products which would be difficult for India to resist.  Thus, the survival strategy in the Trump era lies in India’s preparedness and meticulous empirical research-based output to defend India’s interests and present them effectively in multilateral and bilateral fora.

(Writer is Vice Chancellor, Indian Institute of Foreign Trade, New Delhi)