Trump’s 50 pc tariffs: Why Kerala will feel the pinch

Is it better to be Trump’s enemy or his friend? asks Dr Thomas Isaac, former Finance Minister of Kerala, in a pointed Facebook post.

“China is America’s number one enemy; India is supposedly a friend. But we are being taxed more," adds Isaac.

Economic disaster for Kerala

These striking words from the economist-politician evoke both irony and fury. He lays bare the harsh reality that the Trump administration is escalating tariffs on Indian goods to a staggering 50 per cent under the guise of penalising Russian oil imports. For Kerala, with its deeply rooted export sectors, such a move could mean economic disaster.

Kerala may be small in size, but its global footprints are potent: pepper and cardamom from Idukki and other high ranges, turmeric and nutmeg from plantation estates, cashew and coir from cottage industries, tea from misty hills, and seafood from its coastlines. Together, these drive an export portfolio to the US of roughly ₹5,300 crore annually. Among these, spices alone account for an eye-watering ₹2,900 crore. Seafood adds ₹1,080 crore, traditional industries like cashew, coir, and pulses another ₹1,080 crore, and tea and coffee make up ₹250 crore.

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Dr Isaac paints a grim picture of the future: even if some of these goods find alternate markets or are sold locally, falling prices will devastate production chains and livelihoods.

“This price crash will not only affect the export share but the entire production itself. The resulting loss in national income is incalculable at this point,” he said.

History repeating itself

An ominous backdrop to this scenario is history repeating itself. Kerala’s agricultural sector, which once grew at around 5 per cent annually, was once knocked off course by the ASEAN trade agreement. That unleashed a wave of cheap imports, stalling the growth of rubber, coconut, and other plantation crops. Now, the very industries that survived through export resilience are facing new waves of disruption brought directly to their doors.

Also Read: US retailers halt orders from India after Trump’s 50 pc tariff order: Report

Kerala's service economy, the lifeline of its modern growth, is equally vulnerable. Tourism thrives on income generated from agriculture and allied sectors. If farmers and small producers see revenues dry up, consumption of services from transport and retail to hospitality will falter. A slump in expenditure can ripple through urban centres and rural panchayats alike.

Rupee could slide further

The financial tremors stretch beyond Kerala. India’s foreign exchange inflows could shrink, driving the rupee further downward. From ₹83.12 in January to ₹87.70 by August 7, the rupee’s slide could reach ₹95 by November if tariffs persist. A weaker currency invites inflation with imported fuel, machinery, and even essential commodities becoming more expensive. The Reserve Bank of India’s cautious stance on interest rates reflects this growing concern.

Alarm bells

Chief Minister Pinarayi Vijayan has already signalled alarm. In a social media post, he called the 50 per cent tariff a “blatant violation of global trade principles” and warned it would wreak havoc on Kerala’s key exports - seafood, spices, tea, and coir, endangering livelihoods built on resilience and labour.

“This endangers the workers and farmers who power our economy with their labour and resilience,” he wrote, demanding a firm national response.

Also Read: ‘Not until tariff dispute is resolved’: Trump rules out trade talks with India

Amplifying this sentiment is Finance Minister KN Balagopal, who cautioned that the global tariff war, especially by the US, poses a serious threat to Kerala’s export sectors. Spices, marine goods, and tea stand among the hardest-hit.

“This tariff war will worsen our economy more than Covid,” he warned.

The current push by developed countries like the US and Australia to liberalise the Indian market, especially in sensitive sectors like agriculture and dairy, only adds urgency. Balagopal pointed out that cheaper imports, like Australian milk priced at ₹30 per litre, could devastate local producers. He also pushed back against narratives of Kerala being mired in unsustainable debt, clarifying that the true projection is ₹4.7 lakh crore by the end of FY 2025‑26, far from exaggerated social media claims of ₹6 lakh crore.

Cascading effects

The economic structure of Kerala is such that even slight disruptions can lead to cascading effects. A price crash of pepper not only hits the cultivator but also affects labourers, spices traders, logistics chain workers, and the retail sector. Similarly, the seafood industry connects fishers and exporters to urban markets. A downturn affects canning units, cold storage facilities, and small-town commerce.

Kerala’s seafood sector is already facing a slump, as pointed out in the Kerala Economic Review 2024. In 2023–24, marine exports fell to 1.97 lakh metric tonnes, earning ₹7,231.84 crore - a 10 per cent drop in quantity and 12.7 per cent decline in value from the previous year. The state’s share in India’s marine exports also reduced to 11.05 per cent by volume and 11.95 per cent by value, down from 13.2 per cent two years ago. Despite the downturn, frozen shrimp remains the top export, accounting for 33 per cent of the volume and nearly 49 per cent of the value. Of the total, 18,000 MT was exported to the US.

Also Read: Kharge hits out at Modi over Trump's tariffs; calls it 'foreign policy disaster'

Currency depreciation will further hurt consumers. Imported machinery, fertilisers, and capital goods become costlier. Inflation could squeeze household budgets, especially among the working class, even as political rhetoric posits Kerala as fiscally sound.

Dire future

What lies ahead? Dr Isaac emphasises that Kerala cannot stand alone. He draws parallels with Brazil, urging India to reclaim leadership in defending developing economies from unbalanced trade diktats.

“The legacy of the Non-Aligned Movement is at stake. In a volatile world, increased solidarity and strategic diplomacy may be the only buffer against punitive trade policies,” he said.

Also Read: Trump warns of ‘a lot more’ secondary sanctions after piling 50 pc tariff on India

Most of the economists and policymakers feel that these tariffs are not just a line-item setback, but a challenge to Kerala's very identity. From farmer to fisher, from plantation worker to shopkeeper, lives hinge on a delicate economic ecosystem. If unchecked, the fallout could silence ancient trades, erode living traditions, and plunge the state into a struggle far deeper than a mere recession.