Onmanorama Explains | How will Trump's retaliatory tariffs impact exports from Kerala

Kerala's share in the country's total exports is relatively negligible. Just 1.09 per cent in 2024-25. This was a 40 per cent decline from the 1.87 per cent in 2023-24. Ministry of Commerce data till April this year show that Kerala's share in the country's total exports has dwindled further to 1.1 per cent.

It is on such an endangered sector that Donald Trump's '25 per cent tariff plus penalty for buying oil from Russia' has fallen. The United States of America is the biggest importer of Kerala's seafood, spices and coir.   

Why is Trump's timing dangerous for Kerala?
Even without Trump's "reciprocal tariff", Kerala's seafood industry has been unsteady. Official figures show that Kerala's marine export decreased from 2,18,629 metric tonnes (MT) in 2022-23 to 1,96,807 MT in 2023-24, and value decreased from Rs 8,285 crore in 2022-23 to Rs 7231.8 crore in 2023-24. At the same time, total seafood exports from India had gone up; from 17,35,286 MT in 2022-23 to 17,81,602 MT. 

Kerala's marine exporters fear that Trump's July 30 announcement would eventually be understood as the blow that finished the industry.   

"Between 65-70 per cent of aquaculture shrimp from Kerala goes to the US market. The USA is Kerala's primary seafood market," said Alex K Ninan, the owner of the Baby Marine Group, one of the country's largest seafood exporters.  

Kerala main global competitor in the marine sector is Ecuador, for which the duty is only 10 per cent. "It looks like we are going to be out of the US market. There is a panic situation," Ninan said. 

Is there a key to survival?
Seafood exporters with backward integration can perhaps weather the Trump storm. 

"Those doing just the last stage processing and exporting will find it tough," said Dr K N Raghavan,  former IRS officer and the secretary general of Seafood Exporters Association of India. "This is because the fish farmers (the primary unit in the supply chain) are not going to reduce their prices to absorb the tariff hike. So if the exporter controls production, is also a farmer, then there are better chances of survival," he said. 

What happens to goods in transit? 
Initially, there was uncertainty about the goods that had been shipped before the Trump announcement came. Will the tariff kick in only on products that are dispatched after August 1 (the day the tariffs will come into force) or will it be applicable to products that were shipped from Kerala before Trump made the announcement on July 30 and have still not reached America. It takes 45-60 days for a consignment to reach America.

When Trump first announced 'reciprocal tariffs' on April 2, there was clarity. Then, there was an executive order (Executive Order 14257, Regulating Imports With a Reciprocal Tariff to Rectify Trade Practices That Contribute to Large and Persistent Annual United States Goods Trade Deficits). Based on this, the US Customs had also issued an order. On April 2, it was said that products in 'final transit' before April 9 would be exempted from the 'reciprocal tariff'. Final transit means the shipment is moving to its final destination, and not to an intervening port. 

This time, to begin with, there was only Trump's Truth Social post. Dr Raghavan anticipated "something similar" to the April 2 order. In the wee hours of August 1, as expected, Trump issued executive orders titled "Further Modifying the Reciprocal Tariff rates". There was no reduction in the 25 per cent tariff for India but, interestingly, there was no mention of the penalty Trump had announced for India's oil purchases from Russia. 

​The White House executive order also removed confusion about when the rates would kick in.  

Goods that are on final transit to the US on or before August 7 and those that are released from US customs control on or before October 5 will be exempted from the new tariffs. Meaning, goods already shipped will be spared. Even consignments that begin their 'final mode of transit' on August 7, too, would be spared if it could reach the US shores before October 5. 

Will US clients share tariff burden?
Coir exporters who have already shipped 300-500 containers to the US are staring at losses. "They are committed to sell the consignment at a particular cost. But if the new tariffs are imposed, who will bear the huge additional cost? Will the buyers share the burden? If the exporters are made to bear the entire cost, their business will be decimated," said Pratheesh G Panicker, the managing director of Kerala State Coir Corporation. 

Cashew exporters have already been asked to bear the entire burden of the Trump tariff by their US clients. "Our clients have asked us to bear the additional cost, but we have still not taken a call," said Harikrishnan Nair, the president of Western India Cashew Company (Wenders), the country's leading cashew exporter. "And many of our clients in the US have postponed future purchases," he said.

Will Trump tariffs subvert Kerala's export sector?
Cashew exporters in Kerala export mainly to Arab nations. But for a market leader like Wenders, the US is an important market. According to Harikrishnan, the Trump shock could reshape the world cashew trade in two ways, and both can impair the cashew industry in Kerala.

One, it can instigate tariff-hit countries, including India, to hunt for new markets. "When there is an access barrier to the US, there is a possibility of suppliers redirecting their products to other countries, causing a surfeit of the product in these new markets, which in turn can lower demand, prices and profitability," Harikrishnan said.

Two, it can alter consumer behaviour in the US or, in other words, can lead Americans to rediscover local wonders. "There is only imported cashew in the US. So when cashew prices increase, there could be a shift in consumer behaviour. The US consumers will turn their loyalties to home-grown nuts like pistachio and almond. Our market will be lost forever," he said.

Dr Raghavan said there was such a possibility in the case of shrimp, too. "Shrimp is already a luxury product. If the prices increase further, there is a possibility that the US consumers would choose a cheaper protein like chicken. The shrimp market will then shrink," Dr Raghavan said. 

Panicker, the Coir Corporation MDs said that countries like Thailand and Sri Lanka that were gradually increasing their coir production can corner Kerala's global market as their tariffs are relatively lower. 

There is yet another way Trump could distort coir production in Kerala. "Exporters could take the raw materials and begin production in another country with lower tariffs. This could kill the coir industry in Kerala. In Alappuzha alone, over 25,000 people depend directly on coir for their livelihood," Panicker said.