Beyond trade and income losses, the tariffs will have broader social impacts, signalling potential disruptions in employment, production and livelihoods across multiple sectors.
Published Sep 26, 2025 | 11:12 AM ⚊ Updated Sep 26, 2025 | 11:12 AM
Branch of cashew nut tree with ripe nuts. (iStock)
Synopsis: Kerala’s export-oriented industries are reeling following US President Donald Trump’s announcement of reciprocal tariffs. The state Finance Department said that this steep hike sharply hit key sectors, including seafood, spices, cashew nuts, coir, tea, textiles, carpets, and rubber products.
Kerala, one of India’s most export-dependent states, is bracing for a severe blow as the prolonged US reciprocal tariff standoff threatens to wipe out an estimated ₹2,400 crore in export earnings for 2025-26.
With seafood, spices, cashew, coir and tea — all pillars of the state’s traditional economy — caught in the crossfire, the crisis is poised to ripple far beyond trade figures, shaking rural livelihoods, women’s employment, and the financial security of thousands of families across coastal belts and plantation districts.
Kerala’s export-oriented industries are already reeling following US President Donald Trump’s announcement of reciprocal tariffs on 2 April, which subsequently came into effect on 7 August.
The new policy, combining existing commodity-wise import duties with additional country-specific tariffs, has raised the import tariff on Indian goods to a staggering 50 percent — far above the 10-20 percent applied to most competitor nations.
The state Finance Department said that this steep hike sharply hit key sectors, including seafood, spices, cashew nuts, coir, tea, textiles, carpets, and rubber products.
It forecasts that, based on average export figures from the last three fiscal years, Kerala’s trade with the US — valued at around ₹4,503 crore ($510.56 million) — could see a reduction of 40-60 percent, potentially slashing exports by $276.33 million in 2025-26.
Finance Minister KN Balagopal, who described the policy as “tariff bullying” aimed at penalising India for crude imports from Russia, warned that its repercussions could roll back the state economy to Covid-19-era distress.
Beyond trade and income losses, the minister highlighted broader social impacts, signalling potential disruptions in employment, production and livelihoods across multiple sectors.
Kerala’s export-dependent economy is bracing for a significant setback following the punitive tariffs, which, along with other trade barriers, could reduce the state’s export earnings by an estimated ₹2,500–4,500 crore annually.
Highlighting the gravity of the situation, Balagopal, on 16 September, described at the Kerala Legislative Assembly that the tariffs are a major economic shock, warning that the state’s revenue, already constrained by GST limitations, borrowing caps and limited avenues for raising own taxes, will face further pressure.
The US, as the second-largest importer of Kerala’s agricultural products, accounts for over 20 percent of exports in cashew, rice, vegetables, processed fruits and cereal flours.
Additionally, Kerala’s prominent seafood processing industry faces direct impact, threatening jobs and livelihoods. The tariff hike threatens Kerala’s revenue streams, which heavily rely on trade-related taxes and central transfers.
The state’s fiscal flexibility is already constrained due to factors such as the Goods and Services Tax, public borrowing limits, and a decline in own-tax revenue.
In response, Kerala submitted a supplementary memorandum to the 16th Finance Commission in September 2025, seeking supplementary grants under Article 275(1) of the Constitution and requesting an additional credit limit of 0.5 percent of GSDP.
The marine sector is likely to be among the worst affected. It is pointed out that stricter US scrutiny on shipment bonds is limiting access to working capital, compounding challenges across dependent populations.
The social impact of potential job losses is particularly concerning, as a large portion of workers, especially women engaged in shrimp peeling and processing, face immediate livelihood threats.
Approximately 12-13 percent of India’s seafood exports originate from Kerala. In addition to existing countervailing duties, the state Finance Department said that the US has raised anti-dumping duties from 1.4 percent to 4.5 percent.
Along with a 20-25 percent penalty duty, the total duty burden on shrimp now exceeds 33 percent. The consequences have been swift: US orders have been cancelled, cold storage stocks are piling up, and the utilisation rate of processing facilities has fallen to below 20 percent.
Several lakhs of workers in coastal regions are at risk, and the survival of small and medium processors is under serious threat. The state’s spice sector is equally exposed.
Nearly 40 percent of its exports are destined for the US, and the sector is already reeling from a reduction in the RoDTEP (Remission of Duties and Taxes on Exported Products) benefit from three percent to one percent by the Union government.
Over 80 percent of India’s pepper exports originate from Kerala, alongside significant quantities of cardamom, ginger, spice oils, and oleoresins. The US imports spice products worth over $700 million annually.
With duties gradually increasing to 50 percent, Kerala’s competitiveness is said to be weakening. Exporters have already reported a six percent drop in orders since the tariff announcement.
Meanwhile, countries like Vietnam and Indonesia are emerging as major competitors in the global spice market, posing further challenges to Kerala’s export potential.
It is assumed that the state’s economy may face repercussions far beyond mere trade figures due to the latest US tariff policy. The state Finance Department pointed out that the state’s export sectors are deeply woven into the fabric of local communities, providing livelihoods to a significant portion of the workforce.
Small producers and workers, particularly in coastal villages, plantation districts, and traditional industrial clusters, are vulnerable to disruptions as declining orders from the US threaten their income.
Women, who form the backbone of sectors such as cashew, coir, handloom, and shrimp processing, are especially at risk; a drop in earnings could jeopardise the financial security of countless families.
The ramifications extend beyond immediate income losses, potentially triggering rural distress and social instability.
Expatriate communities, which play an indirect yet vital role in sustaining Kerala’s export ecosystem, may also face challenges, as trade barriers threaten the stability of businesses they operate abroad.
A contraction in local employment opportunities could drive increased migration, compounding social and economic pressures.
Additionally, declining income in traditional industrial and agricultural sectors risks undermining human development indicators, as financial strain may affect education, healthcare, and overall well-being.
The US tariff shock, therefore, is not just a fiscal concern — it is a social one, for the socio-economic landscape of Kerala.
Recognising the potential economic shock, the state government says it has taken proactive steps to address the crisis.
On 22 August, GIFT (Gulati Institute of Finance and Taxation, an autonomous institute of the Government of Kerala) organised a roundtable with industry experts to deliberate on the challenges posed by the new tariffs.
Earlier, on 15 August, Kerala State Industrial Development Corporation (KSIDC) convened a comprehensive meeting in Kochi, bringing together representatives from diverse export sectors, trade associations, planning boards, and trade facilitation institutions. Stakeholders presented concerns, offered suggestions, and requested urgent interventions to safeguard the sector.
Urgent measures have been proposed to mitigate these effects, including facilitating working capital, expediting IGST refunds, providing energy subsidies, and rolling out interim relief packages for affected workers.
Strategic interventions are also emphasised, such as diversifying export markets, shifting from dollar-based to rupee-based trade arrangements, providing market information and branding support, enhancing collective bargaining power, establishing trade-friendly centres in non-US markets, and helping small and medium enterprises meet international standards.
Chief Minister Pinarayi Vijayan, in August, committed to a comprehensive study to evaluate the crisis, while the state has formally raised the matter with the Union Finance Minister and submitted detailed recommendations to the 16th Finance Commission.
Though a statement from Chief Economic Adviser V Anantha Nageswaran, on 18 September, hinted at a possible resolution by 30 November — with the US likely to scrap penal tariffs and scale down reciprocal duties to 10–15 percent — the uncertainty continues to weigh heavily on Kerala’s export economy.
Until then, the state will have to figure out ways to prevent this external shock from cascading into a wider socio-economic crisis.
(Edited by Muhammed Fazil.)
