Despite agriculture emerging as a major stumbling block in India-US trade negotiations, bilateral trade in farm produce is experiencing unprecedented growth in 2025. According to The Indian Express, India’s agricultural imports from the US surged 49.1% to $1,693.2 million in January–June 2025, while exports to the US rose 24.1% to $3,472.7 million, compared to the same period in 2024. However, the imposition of a 50% US tariff on Indian goods, effective August 28, 2025, following a 25% tariff on August 1, threatens this momentum, driven by disputes over market access for US agricultural and dairy products. This article examines the paradox of booming farm trade amid stalled talks, the reasons behind India’s resistance to opening its agricultural markets, the impact of US tariffs, and potential pathways forward, contextualized within India’s broader economic and governance landscape as of August 8, 2025.
The Paradox: Surging Trade Amid Stalled Negotiations
India-US agricultural trade is on track to hit record highs in 2025:
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Exports: India exported $6.21 billion in agricultural products to the US in 2024, led by seafood ($2,483.8 million, primarily frozen shrimp), spices, basmati rice, processed fruits, vegetables, and baked foods, each exceeding $200 million annually. In January–June 2025, exports grew 24.1% to $3,472.7 million.
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Imports: India imported $2.38 billion from the US in 2024, with almonds, pistachios, walnuts, and soybean oil leading. Imports jumped 49.1% to $1,693.2 million in January–June 2025, boosted by a tariff cut on soybean oil from 27.5% to 16.5% to curb inflation.
Despite this growth, trade talks have stalled over India’s refusal to open its agricultural and dairy markets, a politically sensitive issue. Five rounds of negotiations between April and July 2025 collapsed, with the US demanding duty-free access for products like genetically modified (GM) corn, soybeans, wheat, poultry, dairy, and ethanol, while India prioritized protecting its 700 million rural citizens, including 80 million smallholder dairy farmers. Prime Minister Narendra Modi’s firm stance, as echoed in his August 7, 2025, statement—“I will not compromise the interests of our farmers even if I have to pay a heavy price”—underscores the political weight of agriculture.
Why Agriculture is a Sticking Point
India’s resistance to opening its farm sector is rooted in economic, political, and cultural realities:
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Livelihoods at Stake: Agriculture contributes 16–18.4% to India’s $3.9 trillion GDP but sustains nearly half of its 1.4 billion population, with 42% of the workforce engaged in farming. Smallholder farmers, with low productivity (e.g., soybean yields at 1 tonne/hectare vs. 3.4 tonnes in the US), rely on tariffs to shield against cheaper, subsidized US imports.
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Political Sensitivity: Farmers are a powerful voting bloc. Modi’s 2021 retreat on farm laws after protests highlights the risk of rural discontent. Opening markets could crash local prices, as seen in the 1990s edible oil liberalization, which made India reliant on palm oil imports.
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Cultural Concerns: US dairy products, derived from cows fed animal-based feed, conflict with India’s religious sensitivities, while GM crops face consumer resistance.
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Trade Precedents: India’s ASEAN Free Trade Agreement (2010) doubled its trade deficit to $21.8 billion by FY19, hurting farmers due to inadequate infrastructure and non-tariff barriers (NTBs) from partners. India fears a similar outcome with the US, which imposes stringent sanitary and phytosanitary (SPS) standards.
The US, where agriculture is corporatized and subsidized ($61,000 per farmer vs. India’s $282), seeks market access to expand its $176 billion agricultural exports. However, India views agriculture as a livelihood, not a commodity, making concessions politically untenable.
Impact of US Tariffs
President Donald Trump’s tariffs—25% from August 1, 2025, and an additional 25% from August 27, totaling 50%—target India’s $87 billion goods exports, including $6.21 billion in agricultural products. Key impacts include:
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Agricultural Exports: Seafood, spices, and processed foods face competitive disadvantages, as US tariffs on India (50%) exceed those on Chile (10%), Ecuador (15%), Indonesia (19%), Vietnam (20%), and Canada (35%).
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Economic Costs: The tariffs could reduce India’s GDP growth to 6% in 2025–26, with a 40–50% drop in exports. Micro, small, and medium enterprises (MSMEs), especially export-oriented units, face significant losses.
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Geopolitical Tensions: Trump’s tariffs, partly tied to India’s Russian oil imports (35% of energy needs), and his claim of brokering an India-Pakistan ceasefire have strained relations, complicating talks.
India’s defiance, as expressed by Commerce Minister Piyush Goyal, emphasizes protecting national interests, with plans to support exporters through incentives.
Broader Context: India’s Economic and Governance Landscape
The agricultural trade dispute intersects with broader developments:
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Atmanirbhar Bharat: India’s self-reliance push, seen in initiatives like White Revolution 2.0 to boost dairy cooperatives, aligns with protecting domestic agriculture. Union Minister Amit Shah’s August 6, 2025, announcement to increase milk procurement by 50% underscores this commitment.
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Administrative Reforms: Odisha’s crackdown on inefficient staff and the potential appointment of K. Moses Chalai as Finance Secretary reflect a governance push for efficiency, which could extend to trade policy execution.
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Energy and Infrastructure: Coal power’s environmental challenges and Punjab’s rail project delays highlight the need for stable energy and logistics to support agricultural exports, necessitating cleaner technologies and better Centre-state coordination.
Challenges to a Trade Deal
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Non-Negotiable Stances: India’s “red line” on agriculture and dairy, protecting 700 million rural livelihoods, clashes with US demands for duty-free access.
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US Unpredictability: Trump’s shifting demands and rejection of India’s WTO retaliatory proposal on steel tariffs (50% on Indian steel vs. 25% globally) have eroded trust.
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Domestic Backlash: Conceding to US demands risks opposition attacks, especially with agriculture’s political weight.
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Tariff Disparities: US tariffs on Indian goods (50%) far exceed India’s on US products (7–68%), creating a perception of unfairness.
Opportunities for Resolution
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Selective Concessions: India could lower tariffs on non-sensitive US products like apples, almonds, or ethanol, as suggested in July 2025 talks, while excluding dairy and GM crops.
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Industrial Trade-offs: Offering zero tariffs on 40% of US industrial goods, as proposed, could balance negotiations without risking agriculture.
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Bilateral Trade Agreement (BTA): Targeting $500 billion in bilateral trade by 2030, a phased BTA by September–October 2025 could focus on textiles, pharmaceuticals, and energy imports.
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Global Advocacy: India’s WTO-compliant stance on food security could rally BRICS support to counter US pressure, as Trump criticized India’s BRICS membership.
Public Sentiment and Industry Response
X posts reflect polarized views:
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@KiranKS praised Modi’s refusal to allow GM crops, dairy imports, or reduced Russian oil purchases, viewing tariffs as “worth it” for protecting farmers.
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@Trinhnomics noted India’s prioritization of its 40% farming workforce, highlighting the political impossibility of concessions.
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Industry leaders, per BusinessToday, remain optimistic about a breakthrough in the sixth round of talks starting August 25, 2025, seeing tariffs as a pressure tactic.
