India Adopts Cautious Approach as U.S. Imposes New Tariffs: Dairy Trade in Focus

India has opted for a wait-and-see strategy in response to the United States’ recent decision to impose additional import duties on global trade, a move that could ripple across multiple sectors, including India’s burgeoning dairy industry. On April 2, 2025, U.S. President Donald Trump announced reciprocal tariffs ranging from 11% to 49% on approximately 60 countries, including India and China, set to take effect on April 9. Government sources in India emphasized that the country will refrain from hasty retaliatory actions, citing potential pushback from U.S. domestic industries and the need to carefully assess the evolving situation.

The U.S. tariffs, aimed at reducing America’s trade deficit and bolstering its manufacturing base, present a mixed bag of challenges and opportunities for India. While competitor nations like China, Vietnam, Bangladesh, Cambodia, and Thailand face steeper duties—up to 54% in China’s case—India’s 27% tariff hike affects only select sectors. Notably, industries such as shrimp and carpets may feel the pinch, but others, including pharmaceuticals, electronics, and potentially dairy, could see a competitive edge emerge as rival exporters grapple with higher costs.

A Measured Response

“There’s no need to rush into decisions,” a government source remarked. “This is uncharted territory. The U.S. industry itself might resist these tariffs, and we need to observe how this unfolds before charting our course.” The source highlighted that roughly 25% of India’s exports to the U.S. enjoy exemptions, while the rest face a “mixed scenario.” Price-sensitive goods like gold jewelry and carpets are expected to bear the brunt, but sectors with steady demand, such as dairy, could find new openings.

India’s trade relationship with the U.S. remains robust. From 2021-22 to 2023-24, the U.S. solidified its position as India’s largest trading partner, accounting for 18% of India’s goods exports, 6.22% of imports, and 10.73% of bilateral trade. In 2023-24, India recorded a trade surplus of $35.32 billion with the U.S., up from $27.7 billion the previous year—a trend that underscores the resilience of this partnership.

Dairy Trade: Opportunities Amid Uncertainty

In 2024, India’s dairy exports to the U.S. amounted to $181.49 million, a modest yet growing segment of its $2.58 billion fish, meat, and processed seafood shipments and $1.91 billion in cereals, vegetables, fruits, and spices exports. The U.S. tariffs could indirectly bolster India’s dairy sector, particularly as competitors face higher barriers. For instance, while India’s agricultural exports—like rice, which currently faces a 9% U.S. tariff—maintain an edge over Vietnam and Thailand despite the new 27% duty, dairy products could similarly benefit from shifting trade dynamics.

Government sources noted that the Indian diaspora in the U.S., a key consumer base for dairy products like paneer, ghee, and yogurt, is likely to sustain demand regardless of price fluctuations. “The diaspora’s consumption patterns are relatively inelastic,” one official explained. “They’ll continue buying Indian dairy, which gives us a buffer.” This cultural loyalty could shield the sector from immediate tariff-related pressures while opening doors for increased market share if competitors falter.

However, the picture isn’t entirely rosy. The commerce ministry is closely monitoring potential risks, such as the dumping of goods from heavily tariffed countries like China into India. Dairy, though less prone to dumping than commodities like steel or electronics, could still face indirect pressure if global supply chains reroute excess production. Additionally, higher shipping and input costs triggered by the tariffs might squeeze margins for Indian dairy exporters, particularly smaller players.

Broader Implications for India’s Dairy Sector

The U.S. tariffs could serve as a double-edged sword for India’s dairy industry, which has been eyeing export growth amid domestic surpluses. On one hand, reduced competition from tariff-hit nations could allow Indian dairy firms to capture a larger slice of the U.S. market, where demand for ethnic and specialty dairy products is rising. Products like flavored lassi, artisanal cheeses, and traditional sweets—already niche successes—might find fertile ground. On the other hand, the 27% duty could dampen the competitiveness of cost-sensitive items like milk powder or bulk butter if logistics costs rise.

Trade experts suggest that India’s dairy sector, supported by giants like Amul and a robust cooperative network, is well-positioned to adapt. Stakeholder consultations are underway, with the commerce ministry collaborating with line ministries to gauge the tariffs’ full impact. “We’re not just looking at losses but also at how we can turn this into an advantage,” a source said.

Beyond Dairy: A Broader Trade Landscape

India’s 2024 exports to the U.S. spanned drug formulations and biologicals ($8.1 billion), telecom instruments ($6.5 billion), precious stones ($5.3 billion), and petroleum products ($4.1 billion), with imports including crude oil ($4.5 billion) and coal ($3.4 billion). While dairy’s $181.49 million contribution is smaller, its growth potential is significant, especially as India leverages its tariff exemptions and diaspora-driven demand.

For now, India’s strategy hinges on patience and precision. As the U.S. tariffs reshape global trade flows, the country aims to balance short-term challenges with long-term gains—potentially carving out a stronger foothold for its dairy industry in the process.