US tariff blow threatens Kerala's traditional industries and exports, says FM Balagopal

Thiruvananthapuram | Kerala's traditional export industries are staring at one of their toughest challenges in years, with the state government warning that new penalty tariffs imposed by the United States could slash revenues, disrupt supply chains and throw thousands of workers--many of them women--out of jobs.

Finance Minister K N Balagopal, replying to a Calling Attention Motion in the state Assembly, on Tuesday said the new tariff regime was already causing deep concern across marine products, spices, cashew, coir, tea and rubber—sectors that remain the backbone of Kerala's economy.

"These tariffs are not just trade barriers. They are creating major economic shocks in Kerala," Balagopal told legislators.

A preliminary estimate suggests the state's export sector could lose between Rs 2,500 crore and Rs 4,500 crore annually, he said.

According to him, marine exports are among the first casualties.

Kerala accounts for around 12–13 per cent of the country's seafood exports, with shrimp its biggest earner.

But Washington has raised anti-dumping duties on Indian shrimp from 1.4 per cent to 4.5 per cent, on top of countervailing duties and an additional penalty tariff of up to 25 per cent, the minister said.

The effective tariff burden now exceeds 33 per cent, making Indian shrimp significantly more expensive in the US market.

"Orders are being cancelled, stocks are piling up in cold storages and the utilisation of processing plants has slumped below 20 per cent," Balagopal said.

The impact is being felt most sharply along Kerala's coastline, where lakhs depend on seafood exports for their livelihood. Women form the majority of the workforce in shrimp processing units, and their jobs are now at risk.

"This will create large-scale unemployment in coastal areas, and the survival of small and medium processors will be at risk," the minister warned.

The spice trade--long synonymous with Kerala--is also reeling.

More than 80 per cent of India's pepper exports originate from the state, along with cardamom, ginger, spice oils and oleoresins.

Balagopal said the US imports spice products worth over USD 700 million each year.

"But duties that could rise in stages to 50 per cent threaten to wipe out Kerala's competitiveness. Exporters report a six per cent fall in orders since the tariffs were announced, while rivals such as Vietnam and Indonesia are eyeing a larger share of the market," he said.

Kerala's cashew sector faces growing competition from Vietnam, while higher tariffs are squeezing coir exporters and shutting the door on niche markets for handicrafts in the US.

Tea, another staple of the state's economy, is also vulnerable. With annual exports to the US worth around USD 700 crore, growers are already seeing sharp order declines.

Rising production costs and climate change impacts have pushed plantations to the edge, and the tariff shock threatens to tip them into deeper crisis, the minister said.

Rubber exports, too, are expected to suffer. Balagopal said only greater emphasis on value-added products can cushion the blow.

The government's concern is not limited to revenue loss. Balagopal warned that the tariff shock could trigger wide social impacts.

"Our export sectors are closely linked with local communities. The livelihoods of thousands of families are under threat," he said.

In traditional industries such as cashew, coir, handloom and seafood processing, women form the vast majority of workers. Any fall in earnings, he said, will hit household security directly and create new pockets of rural distress.

Kerala's large migrant population also plays an indirect role in sustaining export industries. Trade barriers could destabilise businesses run by expatriates, while job losses at home may fuel fresh waves of migration.

"Income losses in traditional industrial and agricultural sectors may also weaken the state's human development indicators," the minister cautioned.

Balagopal outlined both emergency and long-term measures. Short-term steps include concessional working capital loans for exporters, faster IGST refunds, energy subsidies and interim relief packages for workers.

For the longer term, the government is pushing strategies such as diversifying export markets, shifting from dollar-based to rupee-based trade settlements, improving market intelligence, supporting branding efforts, strengthening collective bargaining and opening trade facilitation centres in countries beyond the US.

Institutions to help small and medium enterprises meet international standards are also on the agenda.

"These interventions will require comprehensive assistance from the central government," Balagopal said, adding that the state had already raised the issue with the Union Finance Minister and submitted detailed recommendations to the 16th Finance Commission.

Several free trade agreements under discussion in New Delhi could further affect Kerala's agriculture and traditional sectors, the minister noted.

The state's Industries Department has begun consultations with exporters, while the Gulati Institute of Finance & Taxation recently convened a roundtable of experts.

Balagopal said the government would also reach out to political parties to form a broad-based consensus on tackling the crisis.

"We must work together to bring these issues to the attention of the Centre and to secure the necessary support," he told the Assembly.