Trump’s tariff exemption on farm goods will boost our exports

US President Donald Trump’s recent decision to shield dozens of food items from his reciprocal tariffs regime has come as a much-needed relief for Indian agricultural exports. This was not a big surprise because last week, he had said that his administration would lower the tariff “at some point” after India scaled down oil imports from Russia.

The two sides, he added, were “pretty close” to a “fair trade deal” that would be “good for everybody.” The exempted products include, among others, tea, coffee, spices, tropical fruits, fruit juices, and tomatoes. Quite expectedly, the Union Commerce Ministry welcomed the move, saying that now our exports will have a level-playing field.

The positive response was because we ship $one billion of these goods to the US annually. This response must be viewed against the backdrop of the tensions that built up in the India-US ties in the aftermath of Operation Sindoor and the subsequent thaw between the two, as evident from many statements made by Prime Minister Narendra Modi and Trump.

A couple of months back, Modi tweeted “India and the US are close friends and natural partners. I am confident that our trade negotiations will pave the way for unlocking the limitless potential of the India-US partnership. Our teams are working to conclude these discussions at the earliest.” He was responding to Trump’s statement on the bilateral trade pact.

The beginning made by Washington will have a positive impact worth $2.5-3 billion of exports, Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO), told the media. “This order opens space for premium, speciality and value-added products.” This will surely help our merchandise exporters, who saw a 12 per cent increase in their shipments to the US in September; farm exports were among the adversely affected. The government believes that the exemption will benefit Indian farmers and exporters of tea, coffee, cashew, fruits, and vegetables.

This optimism, however, is not shared by some experts. Ajay Srivastava, founder of the Global Trade Research Initiative think tank, believes that the announced exemption would result in limited gains for Indian exports, whereas Latin American, African, and ASEAN suppliers may make larger gains.

Many exporters are also skeptical about significant gains. At this juncture, as the government goes for a reset of India-US relations, it must tread cautiously. The recent bickering between the two largest democracies hurt their vital interests. While Modi was measured in his statements, Trump and his key aides said and did things that did a great deal of damage.

Now that statements and announcements are being made that hint at improvement, both sides must ensure that the mending process continues unhampered. This can happen only if New Delhi takes a comprehensive view of the India-US relations and that must include taking political factors into account.

Trump can ill-afford to antagonise farmers in his country—just as the ruling party in New Delhi can’t be insouciant of the concerns of the farm sector. The National Democratic Alliance’s huge win in Bihar will certainly give more confidence to Modi in negotiating trade deals. So, unsurprisingly, the first phase of the proposed India-US bilateral trade agreement (BTA) is reportedly “nearing closure.” The sooner it gets done, the better it will be for both countries.