Californian Almonds Suffer Due to Increase in Indian Tariffs

Almond Kernel

India

Published Feb 26, 2020

Californian almond suppliers are suffering despite good production this season after India imposed retaliatory tariffs on US almonds. The US President's recent visit to India might call for a future trade deal on lowering the tariffs.

India is among the top export markets for Californian almonds and was the largest importer, accounting for USD 600 million in 2018. Although US almonds have seen good production volumes this season, suppliers are expected to face hardships in increasing their exports to India.

This comes after India has imposed tariffs on commodities imported from the US, such as almonds and walnuts, in June 2019. Tariffs on shelled almonds were up by 20% and on non-shelled almonds by 17%. These rates are an addition to the 12% tax the Indian Ministry of Finance requires on both domestic and imported almonds.

India’s Retaliatory Tariffs on US Imports

India’s measures are speculated to be a retaliatory response to the US, as the US increased the level of tariffs on Indian steel imports by 25% and by 10% for aluminum exports in March 2019. Additionally, the US’s decision in early June to relinquish the Generalized System of Preferences (GSP) that had previously given India special privileges in trading is also considered to have impacted India’s decision. India had previously been able to export USD 5.6 billion worth of commodities duty-free in 2017 due to the GSP.

While the US has been wanting to remove tariff hikes as part of the limited trade deal that both sides are negotiating on, with the US attempting to export high-priced medical equipment to India, tariffs on US almonds are not expected to be lowered for the time being.

At nearly 14%, the average rate of tariffs applied in India is one of the highest in major trading countries. Tariffs on manufactured goods such as agricultural products and medical products are especially high. This has led US President Donald Trump to go as far as to characterize India as the “tariff king”.

Californian Growers to be Negatively Impacted Despite Good Production

This is especially a blow for Californian almond growers as nearly two-thirds of Californian almonds are exported to global markets and only a third is consumed by domestic buyers. Furthermore, almond producers are largely dependent on Indian imports, which accounted for over 50% of the US market share of in-shell almond exports in 2018.

Almond production sites in California are also mostly operated by medium-sized, family-run almond producers who are expecting the impact of the tariffs amid a bumper harvest for the 2019 harvest season of 2.5 billion pounds. The United States Department of Agriculture (USDA) predicts almond exports to India will decrease by 5%.

This is a difficult time for US almond suppliers as they are currently facing hardships in exporting not only to India but also to China, another major almond importer to the US. Almonds, walnuts, and pistachios have all been targeted for retaliatory tariffs by China last year as a result of the US-China trade war. While US suppliers have the option to increase shipments to other major importing destinations such as Hong Kong, Vietnam, or Spain, they are still expected to face difficulties due to their export dependence on India and China.

US President’s Visit to India Might Call for Future Trade Deals to Lower Tariffs

The situation is pertinent to US President Donald Trump’s visit to India from February 24 to 25, which is considered to be a step in mending the trade conflicts. Though no trade deals have been made between the two countries during the visit, the US president hinted at a “big trade deal with India” that will be signed later on, although a specific timeline for the deal is still unknown.

While the US has reason to be cautious in further facilitating trade with India due to the trade deficits, the numbers are currently at USD 23 billion, which is still exceedingly below China’s trade surplus of USD 346 billion. Thus this makes it a priority for the US to focus on its trade conflicts with China and have India, another major trading country, as an ally.

There is also an incentive for signing a deal on both sides, as India has been requesting to be reinstated on the GSP and the US has been keen on lowering tariffs for its nuts, fruits, legumes, cotton and dairy exports to India. US almond growers will have to take note of future trade deals between the two countries which would potentially include the lowering of tariffs.