As we all know, Trump has recently announced a new tariff rate for different countries, it being 50% on Indian goods, to be effective from 27th August, 2025.
In 2024, India exported agricultural and allied commodities worth $5.5 billion. In contrast, India imported U.S. products in the same category worth nearly $2 billion. This creates a surplus in India’s favour of approximately $3.5 billion.
Data Source - Reuters
Let Us See What Potential Impacts The Tariff Would Have.
- Reduced Margins For Farmers: Typically, export business helped farmers gain a comparatively higher which would now be impacted.
- Malpractices on the rise: To absorb the tariff rates, exporters would have to resort to sending goods via different countries that have lower tariff rates if they want to still maintain the hold in the US market. Also, large exporters would exploit the smaller exporters.
- Small exporters would get a hard blow. Exporters with huge capitals might still seep through the situations. They might tap into other markets to gain profits. But as small exporters lack capital and connection, they will go years behind their growth.
- Depromotes Organic Farming: Organic farming is good for the environment. Additionally, the US is a big market for organic products to promote it. As the demand from such a market would decrease, it would reflect adversely in the overall demand for organic products.
- Shift In Production Pattern: As the demand for currently grown products might decrease, farmers would also shift their production to some other goods.
- Such a shift was once witnessed in Punjab and Haryana. In response to export demand, farmers in Haryana and Punjab began growing rice, traditionally a South Indian staple, despite it not being native to the region.
- Price Fluctuations: The reciprocal tariffs can lead to price fluctuations in the agricultural commodities. It would in turn affect farmer’s income stability and consumer’s purchasing power.
We saw the impact to the exporters and consumers, now let us see what impact would this have on the overall economy.
Overall, the entire economy would be affected by the President Tariff. India will have to see what next can be done to curb the impact. Also, the FDIs coming to India would reduce to some extent. The investor sentiments would be at a toss and its impacts would be visible. There might also be fluctuations in the value of Indian Rupee at world level.
Now What? Steps India Can Take To Mitigate The Fallout.
As we saw, the impacts of the tariff are concerning. To mitigate the fallout, India will have to plan a thorough strategy.
We would have to try to sit on some negotiations with the US and that is the only market with which we are on a trade surplus. Losing such markets would not be reasonable for our country.
Also, India would have to strengthen relations with other potential countries to get a hold on their markets. This would help our exporters with a new arena to play in. It will help them distribute their products and balance their trade losses.
Moreover, India would have to focus more on schemes like Atmanirbhar Bharat and Make in India. Relying on one country is a perilous way as any imbalance could lead to severe impacts.
We are a country with a population of around 145 crore people. It is almost thrice than the combined population of the U.S.A. and Russia. With such a huge population, we should focus on how to optimally utilize this human resource to grow even more.
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