New Delhi: India has ring-fenced its agricultural and dairy sectors in the interim trade deal with the US released Saturday, while offering significant market access to American tree nuts, livestock feed and premium consumer goods.
Commerce and Industry Minister Piyush Goyal, unveiling the framework for the interim bilateral agreement on X, emphasised that the deal will protect domestic farmers while de-escalating recent trade tensions through substantial tariff reductions on industrial and manufactured goods.
“The agreement reflects India’s commitment to safeguarding farmers’ interests and sustaining rural livelihoods by completely protecting sensitive agricultural and dairy products, including maize, wheat, rice, soya, poultry, milk, cheese, ethanol (fuel), tobacco, certain vegetables and meat,” Goyal said in a statement.
Under the interim deal, Washington has agreed to slash reciprocal tariffs on Indian goods to 18 percent, down from 50 percent (25 percent reciprocal tariffs and 25 percent punitive tariffs), in exchange for greater market access. While US President Donald Trump has already signed an executive order eliminating the 25 percent punitive tariffs placed on Indian imports for trade in Russian oil, Goyal said another executive action is likely next week to drop the remaining reciprocal duty to 18 percent.
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Complete protection for staples
The government has erected a tariff wall around India’s most vulnerable agricultural industries, with the dairy sector—which employs millions of small-scale farmers—receiving comprehensive protection. Products such as milk, cheese, butter, ghee, yogurt and whey remain strictly off-limits to tariff reductions from India’s side.
The shield extends to staple grains, with no duty concessions granted by New Delhi for wheat, rice and maize, ensuring domestic procurement and pricing mechanisms remain undisturbed, according to the framework.
Protection also covers poultry and meat, specifically blocking tariff cuts for chicken legs, a major US export product. Other ring-fenced items include soya, ethanol for fuel use, tobacco, and vegetables such as potatoes, peas and beans.
Strategic openings for US exporters
While core staples remain protected, the interim agreement creates substantial opportunities for American agricultural exports through tariff elimination or reduction by India.
The animal feed sector emerges as a significant beneficiary, with India now allowing easier import of Dried Distillers’ Grains (DDGs) and red sorghum, both high-protein byproducts essential for livestock feed.
The move is perceived as a strategic compromise, aiding India’s livestock industry with cheaper feed while supporting US grain processors.
Premium consumer markets could also see an influx of American produce. Tariffs on tree nuts—including almonds, walnuts and pistachios—are set to be slashed, benefiting growers in American states like California for whom India is already a top market.
The interim deal also lowers barriers for fresh and processed fruits such as citrus and berries, soyabean oil, and reduces duties on imported wine and spirits, which have historically faced some of the world’s highest tariffs.
The framework does not specify the exact reductions or elimination of tariffs agreed by India.
Trade imbalance and growth potential
The agreement addresses persistent trade friction, with Trump having repeatedly criticised India’s high import duties during his second term as US President.
In 2024, India’s agricultural exports to the US totalled approximately $6.2 billion, dominated by marine products—specifically frozen shrimp—spices and basmati rice. In contrast, US agricultural exports to India were valued between $2.25 billion and $2.4 billion, creating an agricultural trade deficit exceeding $1.3 billion for Washington, according to government data.
Across categories that will see reduced or no tariffs such as nuts, fruits, wine and spirits, soybean oil and feed-related goods, India imported agricultural products worth approximately $8.1 billion worldwide in 2024. Of this, US imports accounted for over $1.55 billion, nearly 19 percent of the total.
The US dominates nut exports to India, accounting for over $1 billion of the $1.6 billion India imports.
But other sectors show mixed patterns. India imported fruit worth $1.27 billion worldwide in 2024. Of this, US’s share was just 3 percent.
Similarly, while foreign suppliers dominate soybean oil imports, refined soybean oil from the US to India totalled roughly $500,000. Dried feed exports stood at about $250,000.
In 2024, India imported approximately $407 million worth of soybeans, with Niger, Togo, Benin, and Nigeria making up for key suppliers. Total dried feed imports to India were $2.3 billion for the same period.
The joint statement outlined India’s intent to purchase up to $500 billion worth of US products over the next five years, covering sectors from energy and aircraft to technology. For agriculture, the deal represents a calculated equilibrium: India absorbs specific high-value and industrial US farm products while preserving economic security for its grain and dairy farmers.
“The interim agreement between the United States and India will represent a historic milestone in our countries’ partnership, demonstrating a common commitment to reciprocal and balanced trade based on mutual interests and concrete outcomes,” the joint statement read.
(Edited by Prerna Madan)
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