Context:
There may be only a few advantages to India’s agricultural exports in the ongoing trade war between the U.S. and China, with cotton as the biggest gainer. On the other hand, domestic farmers will be threatened if U.S. agricultural products flood the Indian market.
Key Developments
China’s Retaliatory Tariffs on U.S. Agricultural Imports
- As of March 10, China imposed duties on imports from the U.S., including:
- Chicken, wheat, corn, cotton, sorghum, meat, soybeans, and dairy products.
- The new tariffs followed the announcement of increased U.S. import duties on Chinese goods to 20%.
Gains to India
- Cotton is the only major Indian export that is likely to benefit.
- Soybes and wheat will lose out due to limited surpluses and export restrictions.
- Exports of agricultural products from India for FY24:
- China: $3.54 billion
- U.S.: $5.52 billion
Risk of U.S. Surplus Entering India
- U.S. farmers could export surplus (e.g., maize and soybeans) to India, thereby depressing prices for domestic products.
- From the other end, China cut back on imports from the U.S., down 14% in 2024 following a 20% drop in 2023.
Challenges for Indian Agricultural Exports
- Trade Barriers Globally
- Developed countries apply non tariff measures in markets i.e. EU’s carbon tax; deforestation regulations, etc.)
- Structure of Challenges
- Minimum integration into global value chains.
- Indian high import duty further restricts export trade competitiveness.
- Technology lag behind that of other countries.
- Indian logistics cost: 8 9% vs. 5 6% in developed countries.
India’s capacity to benefit from the present agri export bargain due to the U. China given dynamics is however appallingly narrow; the primary beneficiary being cotton. On the other hand, the threat of U.S. surplus imports would be deleterious to half a dozen domestic farmers, especially on maize and soybeans. On top of that, continued imposition of trade barriers and logistics have crippled India’s competitive standing as an export player.
