Explainer: Will US tariff impact aromatic basmati rice

Reciprocal tariffs on Indian exports announced by US President Donald Trump has led to heated debates on the future of Indian trade, specially exports.

The 26 per cent tariff poses a threat of trade decline in several sectors, including electronics, gems, jewellery and fisheries. Experts say it will also impact Indian rice exports, especially that of basmati — the aromatic rice specific to the Indian subcontinent.

As of 2019, India accounted for 65 per cent of the international trade in basmati and Pakistan, the remaining 35 per cent, as per available data. Many countries have domestically grown long grain but basmati is geographically exclusive to India and Pakistan.

Will tariffs affect rice, especially basmati?

According to some exporters, the 26 per cent tariff is significant but not a reason for panic. Besides, India also has a pricing and tariff edge over competing countries.

The US has levied steeper tariffs on other rice-exporting nations — 34 per cent on China, 46 per cent on Vietnam, 30 per cent on Pakistan, and 37 per cent on Thailand.

Predicting some “short-term fluctuations” and “limited long-term impact” which can be dealt with “strategic planning and flexibility”, rice exporters are adopting a wait-and-watch approach.

“With strategic planning and flexibility, we cannot only protect, but also expand our footprint in the US market,” Prem Garg, national president of the Indian Rice Exporters Federation (IREF) said.

In other words, though significant, tariff should not be a cause for panic among exporters though some near-term challenges due to price changes can be expected.

However, there is also a contrary point of view, as per which the 26 per cent tariff on rice — specifically basmati — will significantly reduce India’s export revenue and disrupt the entire value chain, from farmers to exporters.

The long-term impact could include a lasting loss of market share, reduced farmer incomes, and shifts in global rice trade dynamics, this section believes.

India’s basmati exports to the US face a challenging period, with significant implications for the agricultural trade balance between the two nations.

“Sales for Indian exporters have come to a halt as of today. Many ongoing deals are now in question, creating uncertainty. This situation is forcing exporters to divert their stock to other countries at lower prices today," said Ranjit Singh Jossan, vice-president of the Punjab Rice Industry Association.

Apprehensions

Jossan says Indian basmati rice exports to the US will witness a sharp decline due to high prices, rendering Indian rice uncompetitive in the global market.

A more positive argument is that in case of basmati, there may not be any competition for Indian brands since the tariff for Pakistan is higher at 30 per cent. However, Jossan believes otherwise. There will be “significant impact on India’s basmati rice exports,” he says.

“The additional 26 per cent tariff will squeeze profit margins for exporters, pushing millers and traders into financial distress and US importers may shift to alternative suppliers like Pakistan, where a weaker currency enhances price competitiveness. This could lead to a permanent reduction in India’s share of the premium rice market.

“Exporters will be compelled to lower procurement prices, directly affecting farmers’ income. Reduced exports will result in basmati rice stockpiling in India, depressing domestic prices. Industries supporting rice exports, including milling, packaging, logistics and warehousing will experience slowdowns, impacting employment and investment,” he says, predicting higher prices for consumers as well.

“American consumers will have to pay higher prices, leading to reduced consumption. Some may also opt for other rice varieties or grains like quinoa and brown rice, potentially reducing long-term demand for Indian basmati. South Asian grocery stores in the US — which rely heavily on basmati sales — will experience declining demand," he said.

“If prolonged, US importers may establish lasting relationships with non-Indian suppliers, eroding India’s market dominance. India already lags behind Pakistan in the EU due to pesticide concerns," he added.

India’s basmati export

The GI tag for basmati rice is applicable only to rice produced in certain regions of India and Pakistan. In India, the primary basmati-producing states include Punjab, Haryana, Delhi, Himachal Pradesh, Uttarakhand and parts of Uttar Pradesh and Jammu & Kashmir.

India is the largest producer of basmati rice, accounting for a significant portion of the global production. Basmati rice is a major export crop for both India and Pakistan and the US is a major market for this rice variant.

India’s basmati exports to the US stood at 3.15 LMT in 2022-23 and 3.08 LMT in 2023-24. India’s total basmati exports increased from 52.42 LMT in 2023-24 to 59.42 LMT in 2024-25 but shipments to the US are declining, says Jossan.

Whether the newly imposed tariff will affect export volumes, potentially leading to a loss of market share to competitors from countries not subject to similar tariffs, remains to be seen. The fact is Indian exporters are already struggling due to disruptions in the Red Sea trade route and the Iran-US tensions. Meanwhile, they also have the option of exploring alternative markets.

India