India faces limited gains, more pain from trade war between US and China

Advantage cotton producers, but other farm items at risk of glut from US supplies, say experts

As the trade war between the US and China intensifies, any possible gains for Indian exporters of agricultural products for now could be limited only to cotton, trade experts said. On the contrary, if US dumps its leftover surplus from China into India taking advantage of any favourable tariff structure, it could harm India's farm sector.

 

On Tuesday, China announced that it will retaliate with higher tariffs on imports from the US, on a slew of agricultural products such as chicken, wheat, corn, cotton, sorghum, meat, soybean, and dairy products, among others, from 10 March.

 

The announcement came in after the US had announced doubling of duties on Chinese goods to 20 per cent, a month after America imposed an extra 10 per cent duty on inbound shipments from Beijing. The additional tariffs on Chinese goods came in addition to the ones imposed by US President Donald Trump’s first term, followed by import taxes on many items, including semiconductors and electrical vehicles, during the Joe Biden administration.

 

According to Agricultural and Processed Food Products Exports Development Authority (APEDA) data, India exported roughly $3.54 billion worth of agricultural goods to China in 2023-24 (FY24). In the case of the US, agri exports stood at $5.52 billion during the same period.

 

“Of all the commodities that India could benefit if China cuts down on its agricultural imports from the US, cotton stands to gain the most as India has been exporting cotton to that country,” Gokul Patnaik, chairman of Global Agrisystems Pvt Ltd and former head of APEDA, told Business Standard. 

 

“Among other items, soybeans are not surplus in India and wheat exports are not allowed. To my mind, export opportunities to China can only arise in cotton among all the items in which tariffs have been raised,” said Patnaik.

 

China imported $29.25 billion worth of US agricultural products in 2024, a 14 per cent decline from the previous year, extending a 20 per cent drop in 2023. US agricultural exports to China have declined since 2018 after Beijing slapped tariffs of up to 25 per cent on soybeans, beef, pork, wheat, corn and sorghum in retaliation for duties on Chinese goods imposed by Trump, according to a Reuters report.

 

Since 2018, Beijing has also diversified its agricultural imports, ramping up purchases from suppliers led by Brazil, and boosted domestic production in pursuit of greater food security. Nonetheless, China remains the largest export market for American farmers. US farm leaders and traders have described China as "irreplaceable" even as they look for other markets to offset declining Chinese demand, the report said.

 

However, some experts also warned that since there will be higher tariffs on exports of US agricultural products to China, there could be a possibility of a flood of these products into the Indian market from America. This could affect Indian growers, particularly of crops like maize and soybeans.

 

“The problem is that the US will be saddled with a surplus of certain agri products they used to export to the Chinese market. This may increase pressure on India to buy more agri products from the US,” said Biswajit Dhar, distinguished professor at the Council for Social Development.

 

“Moreover, right now, both sides have decided (after the meeting between Prime Minister Narendra Modi and President Trump) to increase trade in agricultural goods,” Dhar said.