U.S. Tariff Hike Poses Long-Term Risks to India’s Marine Exports and Trade Strategy

Context:

• The Ministry of Commerce and Industry informed the Public Accounts Committee (PAC) that recent U.S. tariff increases could have long-term adverse effects on India’s trade, particularly marine exports.

• The issue has major implications for coastal economies, export competitiveness, and India’s trade diversification strategy.

Key Highlights:

U.S. Tariffs and Sectoral Impact

• The United States imposed higher tariffs on Indian goods, with marine exports being the worst hit.

• A 50% duty imposed in August has severely impacted shrimp exports, leading to an effective levy exceeding 58% after additional charges.

• Shrimp is one of India’s largest marine export items, making the sector highly vulnerable to tariff shocks.

Concerns Raised by the PAC

• The PAC expressed concern over the economic fallout in coastal towns, where livelihoods depend heavily on shrimp farming, processing, and exports.

• High tariffs risk:

  • Loss of export orders

  • Income stress for fishers and aquaculture workers

  • Reduced foreign exchange earnings

Competitive Landscape

• India’s key competitor, China, is also facing similar U.S. tariff measures, partly easing concerns in sectors like pharmaceuticals.

• However, Rajesh Agarwal, a senior Commerce Ministry official, acknowledged that elevated tariffs still place India at a competitive disadvantage in global seafood markets.

Government’s Market Diversification Strategy

• To mitigate risks, India is actively pursuing Free Trade Agreements (FTAs) with:

  • The European Free Trade Association (EFTA)

  • The United Kingdom

• India is also:

  • Registering more marine export units in the EU

  • Exploring new markets such as Russia to reduce overdependence on the U.S.

EPCG Scheme Under Scrutiny

• The PAC expressed dissatisfaction with the Export Promotion Capital Goods Scheme (EPCG).

• Under the scheme, ₹42,714 crore in duties were forgone between FY 2019–21.

• The committee directed the government to clearly demonstrate how EPCG has contributed to manufacturing growth and export competitiveness.

Broader Trade Implications

• The tariff shock highlights India’s vulnerability to protectionist trade policies.

• Reinforces the need for:

  • Diversified export destinations

  • Value addition in marine products

  • Strengthened domestic supply chains

• FTAs are increasingly seen as a strategic tool to secure market access and reduce tariff uncertainty.

UPSC Relevance (GS-wise):

• GS Paper 3 – Indian Economy

  • Prelims:

    • Tariffs, FTAs, EPCG Scheme, marine exports.

  • Mains:

    • Impact of protectionism on India’s export sectors.

    • Challenges faced by coastal and export-dependent economies.

• GS Paper 2 – Polity & International Relations

  • Prelims:

    • Role of PAC, trade negotiations, bilateral trade measures.

  • Mains:

    • India–U.S. trade relations and dispute management.

    • Importance of FTAs in India’s external economic policy.