Impact on India’s agriculture sector after 50% US tariff

How the Tariff Came About

In August 2025, the U.S. government announced a two-part tariff increase on Indian goods: a 25% reciprocal tariff followed by an additional 25% penalty tied to India’s continued purchases of Russian oil—bringing the total duty on many Indian exports to 50% These elevated tariffs became effective on August 27, 2025

Here’s a clear breakdown of how a 50% U.S. tariff could affect India’s agriculture sector, particularly in terms of exports, domestic producers, and broader economic implications:

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Export Impact on Indian Agri-Food Products

• Seafood (shrimp, etc.)
  Indian seafood exporters, especially in shrimp, cannot absorb a 50% tariff and are likely to pass the cost on to U.S. buyers—potentially reducing demand and harming export volumes.
  
  
• Processed foods, pulses, spices, rice, guar gum, plant proteins
  These agri-food and processing segments rely heavily on competitive pricing. A 50% tariff severely undermines their competitiveness in the U.S. market.
  
  
• Basmati rice
  Punjab’s basmati sector is particularly vulnerable. With the U.S. being a premium market and now affected by steep tariffs, prices have already dropped dramatically—from ₹4,500 to ₹3,500 per quintal—prompting farmers to shift to regular paddy.
  
  
• Makhana (fox nuts)
  Around 2,000 tonnes are exported annually (half to the U.S.)—the tariff could result in over a 60% drop in exports, significantly impacting this niche yet valuable segment.
  

Domestic Vulnerabilities and Farmer Distress

• Cotton farmers in Vidarbha (and beyond)
  The extension of a duty-free cotton import window until December 31, 2025, introduces cheaper U.S. cotton into the Indian market during harvest season, pushing domestic prices below the MSP. This severely undercuts farmers’ incomes.
  

Broader Economic Ripple Effects

• GDP Growth and Export Positioning
  Economists estimate that the tariffs could reduce India’s GDP growth by up to 1 percentage point. Some sectors—especially labor-intensive ones like textiles and food items—stand to absorb a disproportionate part of the hit. Exporters may lose U.S. market share to Bangladesh, Vietnam, and others.
  
  
• Effective Tariff Rate
  Although the headline rate is 50%, exemptions bring India’s effective rate to around 33.6%. Still, that level puts Indian agri-exports at a notable disadvantage relative to competing countries.
  
  
• Strategic Repercussions
  The tariffs may disrupt India’s long-term agricultural export strategies, prompting policymakers and exporters to diversify their markets toward Europe, Southeast Asia, Africa, and Latin America to mitigate the impact.
  

Summary: Key Impacts by Agriculture Domain

Area	Expected Impact
Seafood/Processed Foods	Exports likely to drop or become unviable—exporters passing costs to U.S. buyers
Basmati Rice / Makhana	Significant contraction in exports—loss of premium market and farmer distress
Cotton Farmers	Domestic price pressure from cheap imports—harms MSP-related incomes
Rural Employment	Potential job losses in export-linked agribusiness and processing industries
Policy Response	Need for export subsidies, diversification, reforms, and new market strategies

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Conclusion

The 50% U.S. tariff (effective ~33.6%) has stark implications for India’s agriculture and food processing sectors:

• It undermines export competitiveness, particularly for rice, seafood, processed foods, spices, and niche products like makhana.
• It puts farmer livelihoods at risk, whether in cotton, basmati, or other commodity production.
• Exporters face steep losses or forced market exits, potentially shifting consumer and supply chains away from India.
• The wider economic cost includes slower GDP growth, job losses, and pressure on rural incomes and investment.
• Government strategies—such as diversifying markets, offering financial support, and accelerating trade and structural reforms—will be essential to offset the damage.

Here’s an in-depth style overview on how a 50% U.S. tariff is affecting India’s agriculture sector, drawing from recent data and analysis by industry bodies, think tanks, and news agencies.