As the US moves to impose steep tariffs on agricultural imports, Palit suggests that India, currently negotiating a trade agreement with the US, could leverage this situation to secure favourable terms for its exports.
Palit’s remarks come in the wake of Trump confirming 25% tariffs on Canada and Mexico while doubling tariffs on China to 20%. The trade war has triggered retaliatory measures, with Canada imposing duties of up to 25% on $127.7 billion worth of US goods and China introducing additional tariffs on American agricultural products, including chicken, wheat, corn, cotton, soybeans, pork, and dairy.
Despite concerns about global supply chain disruptions, Jayant Dasgupta, former Indian Ambassador to the World Trade Organisation, believes that the US tariff hikes will unlikely affect Indian agricultural exports severely. He told CNBC-TV18 that India exports coffee, tea, and other beverages worth approximately $390 million annually to the US, along with shrimp and fish exports amounting to about $2 billion. While a blanket 100% tariff on all US agricultural imports would be problematic, he does not foresee significant damage to India’s export volumes under the current scenario.
Palit, however, warned that Trump’s aggressive tariff policies are unlikely to ease, despite short-term economic costs. He said Trump’s address to the joint houses of Congress on Wednesday morning will be an opportunity to frame these tariffs as beneficial to the US economy in the long run.
With India and the US currently negotiating a trade deal, Palit sees a potential opening for India to secure better market access. If competing exporters face high tariffs while Indian exports receive concessions under a free trade agreement, India could gain a competitive edge in the American market.
However, both experts cautioned that the long-term impact of the tariff war remains uncertain. While new trade dynamics may benefit certain Indian exports, global supply chain disruptions and retaliatory measures could introduce unforeseen challenges.
Edited Excerpt from the Interview:
Q: How do you think tariffs on agricultural imports in the US will impact exports from India specifically?
Dasgupta: The US is one of the largest exporters of agricultural products. In 2024, it imported about $204 billion worth of products. And if the US were to impose 100% tariffs, the burden would have to be borne by US consumers.
The second point that I wanted to make is that, as far as India is concerned, India exports coffee, tea, and other beverages worth about $390 million. That is one of the largest. Shrimp and other fish, which are, strictly speaking, not considered a part of the agricultural universe, fall under the non-agricultural market access (NAMA) category, which includes industrial products. Now, that is the largest export product. If you take it as part of agriculture, it amounts to about $2 billion. Other things like honey and essential oils come next. So, India’s agricultural exports are not very high and are focused on or concentrated in only a few chapters of the harmonised code. So, I don’t think they will be affected very much. But, of course, if the US imposes 100% tariffs on all agricultural imports into the US, irrespective of the country, then it will be quite problematic.
Q: Do you think Donald Trump will follow through on this threat of tariffs on agricultural imports?
Palit: I think he will. There is a reason for that. The reason is pretty clear: with tariffs being imposed on US exports to various other countries, there is a serious prospect that prices for US consumers in their domestic market will increase. And if you have noticed, most of the retaliatory tariffs imposed on US exports so far, principally from China and Canada, target US agricultural exports to these countries. So, a side to the tariff play is becoming prominent now. There is a cost to the tariffs introduced by Trump 2.0. He has admitted that there is likely a cost in the short run. However, what that cost will generate is a twofold effect. First, in many cases, American consumers will face much higher product prices. Second, several American exporters, particularly agricultural exporters, which represent significant segments of the Republican constituencies, will be hit hard on their market access exports.
So, this is now a reverse policy being introduced. While the initial round of tariffs under Trump 2.0 aimed to improve the market access of American products in other countries, now the flip side is coming into play—American consumers will be encouraged to buy more from domestic producers to mitigate economic losses from retaliatory tariffs.
And one quick point here. I think Donald Trump will deliver his first address to Congress after getting elected, where he will address his domestic political constituencies. I think that will be an opportunity for him to send a message to all constituencies about the success and long-term fruitfulness of the measures he is adopting.
Q: Regarding agricultural exports from India to the US, which product lines do you expect to be hardest hit by Trump’s tariffs?
Palit: I expect some impact on pulses, and possibly on essential oils or other oils in general. But I’m not too worried about widespread impacts on Indian agricultural exports. This is for the very simple reason that India also has an opportunity. The opportunity is that India and the United States have begun negotiating a bilateral trade agreement. With the backdrop of these tariffs on agricultural exports, India has a reference point to evaluate the kind of market access it wants in the American market. If many competing agricultural exports face high tariffs while Indian exports receive concessions under the first tranche of the FTA being worked out. In that case, India may find an opportunity in this scenario.
Q: Donald Trump has also followed through on his threat of tariffs on Canada and Mexico. He’s confirmed that 25% tariffs on Canadian and Mexican exports to the US will take effect. He’s also doubled tariffs on China to approximately 20%. Retaliatory tariffs have also come into effect from both Canada and China. How do you think this will impact global supply chains and India?
Dasgupta: There will be a lot of upheaval and disruption in supply lines and trade flows. Canada is the largest destination for US agricultural exports. China is also among the top five. Sometimes, China is the largest buyer of American farm products, while at other times, it is Canada, followed by Colombia, Japan, and South Korea. If 100% tariffs are imposed, the Chinese export some agricultural products to the US, which may trigger cross-sectoral retaliation. And the Chinese have already begun retaliating by announcing a 15% additional tariff on American products.
So, it will be quite chaotic, with retaliatory tariffs being implemented globally. This tit-for-tat trade war will continue across international markets, and it is very difficult to predict when it will end and when common sense will prevail — because this is not how international trade can grow and benefit all participating countries.
Q: How do you see these tariff wars, which have now fully escalated, impacting India? With the US and China imposing tariffs on each other, as well as Canada and the US, is there an opportunity for India, or in the short run, will certain products be negatively affected?
Palit: It can go both ways. As I mentioned earlier, India could have an opportunity because it now understands what to expect during negotiations. Generic tariffs on agricultural products, steel, aluminium, and copper affect several countries. Existing trade arrangements will also be disrupted — for example, the US-Mexico-Canada Agreement may no longer function as it previously did. This could create a whole new range of opportunities for India.
But there are challenges ahead. The first is that these escalating tariffs will increase embedded costs for producers. There will be attempts to divert production to bypass tariffs. Some countries may scramble to increase production, while others may struggle. Given these uncertainties, India’s prospects are still unclear.
The second issue is reciprocal tariffs. The problem is that the US has indicated it will not impose one-for-one retaliatory tariffs. Other factors, such as non-tariff market access barriers, investment restrictions, and currency positions, will influence these tariffs.
India holds an interesting position right now. Aside from Japan, it is one of the few countries with which the Trump administration has shown interest in negotiating a straightforward bilateral trade agreement. The US has made its interest clear, and it is now up to India to seize this opportunity and secure a balanced outcome.
