Ghee, butter, milk powder could become uncompetitive under proposed 38.23% tariff differential

 Indian dairy exporters are staring down a potential trade storm as the United States, under a possible second Trump administration, signals a sharp policy pivot that could raise tariffs across a wide spectrum of imports. According to a new report by the Global Trade Research Initiative (GTRI), Indian dairy is among the most exposed categories, facing a staggering 38.23% tariff differential — a move that could render products like ghee, butter, and milk powder commercially nonviable in the U.S. market.

“Such steep disparities will sharply raise the cost of Indian dairy products like ghee, butter, and milk powder in the U.S. market,” said Ajay Srivastava, Founder of GTRI. “This will limit competitiveness just as Indian exporters were beginning to explore new market opportunities in value-added dairy.”

📊 Tariff Impact Snapshot: Indian Export Sectors at Risk

Source: GTRI, 2025 Report on U.S. Reciprocal Tariffs

🧮 Jordbrukare India Analytics: Dairy Growth at Risk

According to Jordbrukare India, a leading agri-food insights firm, Indian ghee exports to the U.S. grew by 28% year-on-year in 2024, driven by:

• Surge in A2 and organic ghee SKUs
• Increased visibility on Amazon U.S. and ethnic grocery chains
• Expansion into functional dairy proteins and clean-label powders

However, a 38.23% tariff would “effectively erase India’s price advantage,” with Jordbrukare estimating that:

“Up to 65% of India’s dairy shelf share in the U.S. may vanish by Q4 2025 unless exporters reconfigure their logistics, use U.S.-based co-packers, or route via UAE and Europe for tariff-shielded relabeling.”

📉 Why Dairy Faces Disproportionate Risk

While the absolute value of dairy exports to the U.S. ($181.49M) is modest compared to seafood or pharma, the category is acutely price-sensitive. Indian ghee is often positioned as a lower-cost alternative to New Zealand and American organic varieties. With an added 38% cost, this competitive edge disappears overnight.

“We’ve just started gaining ground in overseas dairy markets through brands like Amul and niche exporters,” said a senior official from the Indian Dairy Association. “These tariff changes could undo years of work.”

🔄 Industry’s Dilemma: What Should India Do?

GTRI outlines five policy responses. The most pragmatic among them:

✅ Zero-for-Zero Strategy

India should propose eliminating tariffs on 90% of industrial goods for mutual benefit, while excluding agriculture. If accepted, it would help maintain dairy access to the U.S. without sacrificing domestic protections.

🟡 No Action – Strategic Absorption

India may choose to absorb the tariffs quietly, avoid escalation, and shift focus toward EU, ASEAN, and GCC markets while investing in domestic processing efficiencies.

Other options — such as retaliatory tariffs or a rushed FTA — carry high risk and limited near-term returns.

📦 What’s at Stake for Indian Dairy Exporters?

Short-Term Actions:

• Reroute through low-tariff packaging hubs (e.g., UAE, EU)
• Partner with U.S.-based processors to avoid tariffs
• Focus on storytelling and “origin” branding to justify premium pricing
• Expand in Africa and Southeast Asia, where India holds trade leverage

Medium-Term Moves:

• Develop joint ventures with U.S. retailers
• Launch functional dairy SKUs (e.g., ghee with ashwagandha, collagen powders)
• Support government efforts for a WTO or GATT-compliant tariff deal

⚖️ WTO Legal Challenges Loom

The U.S. tariff threat may violate multiple WTO principles:

• Most Favoured Nation (MFN): Discriminating based on origin
• Bound Tariff Ceilings: Exceeding agreed limits
• S&DT Flexibility: Denying development concessions to India

India could choose to escalate through the WTO Dispute Settlement Body if these tariffs are imposed unilaterally.

📌 Final Word

With the Trump tariff playbook back on the table, Indian dairy faces an inflection point. What was once a fast-growing, high-margin niche in global trade may now become collateral in a broader geopolitical recalibration.

But all is not lost — with swift government intervention, creative market repositioning, and targeted diplomacy, India can still protect its dairy pride on the global stage.

“The answer to tariffs is not panic — it’s precision,” says a Jordbrukare India analyst. “Dairy must shift from being a volume play to a value proposition.”