Indian rice market to face short-term disruption by US reciprocal tariffs

A US reciprocal tariff of 26% on Indian imports is likely to cause some pressure on Indian rice prices in the short term, especially for basmati rice, but the long-term impact is expected to remain minimal, market sources said April 3.

US President Donald Trump announced the reciprocal duty, which is likely to come into force by April 10.

According to India's Agricultural and Processed Food Products Export Development Authority, the US accounts for 5% of India's basmati rice exports. From April to January in the 2024-25 period, India exported 230,643 mt of basmati rice and 51,334 mt of non-basmati rice to the US. In the fiscal year 2023-24 (April-March), India's rice exports to the US rose 30,444 mt year over year to 234,469 mt.

"If we see our competitor countries, Vietnam and Thailand are facing 46% and 36% tariffs. Initially, it will be a bit hard to digest, but I don't think it will be tough in the long run. The US will also feel the heat of inflation in the local market after raising taxes," a major basmati rice exporter to the US said.

The exporter also anticipates some renegotiation of the current contracts.

Trump has imposed Pakistan with 29% duty and Cambodia with 49%, while India is maintaining its competitiveness.

Media reports indicate a universal 10% tariff will be applied to all imports into the US starting April 5, and the higher country-specific tariffs will take effect from 12:01 am local time (0401 GMT) April 9.

Some Indian exporters expect the heat to be divided among other origins as "competition [for India] is Pakistan for basmati and Thailand and Vietnam for aromatic varieties. All competing origins [tariffs] are higher."

"One thing is sure -- Indian rice will not lose [its] share in [the] US market," another major rice trader in India said.

Pressure on prices

Few exporters expect pressure on prices for both basmati and non-basmati varieties, such as Sona Masoori, which is usually produced in south India and exported to the Indian diaspora.

An Indian exporter said, "there will be pressure on prices as well as the shipments in transit will suffer. Usually, shipments from India take 35-45 days to reach US ports. There have been instances when buyers defaulted in Algeria, and Vietnam due to policy changes. Big private brands might not suffer much, but one-on-one transactions with buyers and small players are likely to see impact".

The exporter added one of their US buyers was waiting for tariff news and anticipating basmati rice prices to fall.

Another India-based trader said although they don't export much non-basmati rice to the US, Indian prices would absorb half of the increased import duty to appease buyers, as that is usually the case, and that will create pressure on prices.

Possible minimal impact on Pakistan's basmati rice market

According to sources, Pakistan exports "1,500-3,000 mt/month on average" to the US. A Pakistan-based exporter said Pakistani basmati prices would fall only if main destination markets like Iran and Afghanistan do not purchase rice.

Another Pakistani basmati rice exporter said India accounts for 90% of basmati rice exports to the US, so the impact on Pakistan's exports will be minimal.

While Indian market participants are reacting to the new tariffs, US market participants are in a wait-and-watch mode.

"At this point, we don't know which countries will decide to retaliate, or whether they'll retaliate against rice, but note that a number of these markets are key for US rice exports. However, we hope these tariffs will create leverage to pursue some meaningful market access in future negotiations. We are also encouraged that some of the key import markets (India, Thailand, Pakistan, Vietnam, and China) were assessed higher than the base level. We will continue to monitor each country's retaliatory announcements and provide an update as we learn more," a market participant from the US stated.

Indian market bearish on anticipation of fresh supply

With rabi crop harvest anticipated by the end of April and summer crop sowing currently taking place, the Indian rice market currently has bearish undertones.

Platts assessed India 1509 Steam basmati rice down $176/mt FOB year over year at $774/mt FOB March 28, India 1121 Steam basmati rice down $169/mt at $928/mt FOB and India Pusa Steam basmati rice down $256/mt at $694/mt FOB over the same period.

"Basmati prices are already down, so chances of high impact on prices are less. We have heard that farmers in Uttarakhand would now be planting 1509 in the summer crop season, which will be harvested in another 60 days or less," Rijul Bajaj, Managing Director at SNTC Agro Technology, said.

India is forecast to export 22.5 million mt of rice in the marketing year 2024-25 (October-September), up 56.25% year over year, according to S&P Global Commodity Insights data.