When Donald Trump introduced his new tariff rules for greater than 180 international locations on April 2, what he termed as “Liberation Day,” it despatched shockwaves throughout the worldwide commerce panorama.
Like different areas, South Asia, a area of over 2.04 billion folks, whose economies rely closely on exports to the US, can be deeply impacted by Trump’s tariffs. Governments within the area might want to reply rapidly to make sure that their already struggling economies don’t sink additional.
The brand new tariffs for South Asian international locations vary from 10 p.c to 44 p.c. A ten p.c minimal tariff can be imposed on all international locations. Within the case of nations with massive U.S. commerce deficits, Trump has levied tariffs at half of what the buying and selling companion nation imposed on U.S. imports, although the calculation formula has been disputed.
India, the area’s largest financial system, exported $77.5 billion value of products to the U.S. in 2024, with common U.S. tariffs of beneath 2 p.c. Bangladesh, the second-largest South Asian exporter to the U.S., had a median tariff of about 15 p.c on its items. Bangladesh’s attire exports to the U.S., made up primarily of ready-made clothes (RMG), rose by 0.75 p.c year-on-year in 2024, reaching $7.5 billion.
Likewise, Pakistani, Sri Lankan, and Nepali items imported to the U.S. drew modest tariff charges, usually falling under 10 p.c, relying on the product classes. These decrease tariffs gave the area a worth benefit over rivals in Southeast Asia, Latin America and components of Africa.
Nonetheless, beneath Trump’s new coverage, India faces a 26 percent tariff on its items, whereas Bangladesh, Pakistan and Sri Lanka have been slapped with 37 percent, 29 percent, and 44 percent tariff, respectively. As for international locations like Nepal, Bhutan, Maldives, and Afghanistan, whose export volumes to the U.S. has been small, their items will face a common 10 p.c tariff, which nonetheless means greater obstacles than earlier than.
These dramatic adjustments might harm financial stability in a number of of those international locations, notably since a lot of them are creating international locations. What’s extra, the tariff hikes come at a time when they’re already grappling with inflation, political upheaval, youth unemployment, and post-COVID restoration.
Bangladesh is maybe probably the most weak. Its financial system is deeply tied to its garment sector, which employs greater than 4.1 million employees, largely ladies, and earns most of its international earnings from U.S. and EU markets. The usis Bangladesh’s single largest market. A 37 p.c tariff makes Bangladeshi merchandise much less aggressive in comparison with these from international locations like India or Vietnam.
Whereas precise monetary losses are but to be calculated, native exporters and commerce associations have expressed robust concern. Many worry that U.S. consumers will scale back future orders or search for cheaper alternate options elsewhere, which might have an effect on manufacturing unit jobs and wages. Bangladesh is present process a political transition following the ouster of Sheikh Hasina on August 5 final 12 months. Because of this, it has been experiencing important social unrest, notably within the RMG (readymade garment) sector. Employees have been on strike over wages.
Indian items face 26 p.c tariff beneath Trump’s new guidelines. It’s anticipated to have damaging results on the Indian gems and jewellery sector. The U.S. is a key marketplace for this sector, accounting for practically $10 billion or 30.4 percent of the nation’s complete annual exports on this class, valued at $32 billion. The jewellery sector is making ready for a big decline in exports on account of steep U.S. tariffs
India’s third-largest export to the U.S. after engineering and digital items, the gems and jewellery sector helps thousands and thousands of jobs throughout the nation. Nonetheless, this sector has already been beneath strain of late on account of weak demand from China, with general exports declining by 14.5 p.c to $32.3 billion within the 2023–24 fiscal 12 months. Smaller exporters might not have the assets to soak up these new prices. Many Indian producers are additionally recovering from international inflation and foreign money depreciation, so this commerce strain might delay their restoration.
Nonetheless, general, the influence of tariffs on India may very well be completely different from that on Bangladesh because it has a extra diversified export basket that features prescription drugs, jewellery, automotive components, equipment, RMG and electronics.
Regardless of the tariff burden, a brand new window of alternative might open up for India’s exports to the U.S., as Trump’s tariff price for India is relatively decrease than the charges for key rivals within the attire market — Bangladesh, Sri Lanka, China (34 percent), Vietnam (46 percent), and Cambodia (49 percent). This creates a possible aggressive window for India’s RMG sector, which has lengthy trailed behind Bangladesh and Vietnam within the U.S. market. In 2024, India’s RMG exports to the U.S. stood at roughly $4.2 billion, behind Bangladesh’s $7.34 billion.
With Bangladesh and others dropping the value benefit on account of steep tariffs beneath the brand new guidelines, Indian producers, particularly mid-sized and large-scale exporters, can place themselves as an economical and dependable different. India already noticed an 11.5 p.c increase in RMG exports for the month of January 2025 in comparison with January 2024, when exports grew by 7.6 p.c in comparison with January 2023. So, India can harness the chance amidst this chaos.
The influence of the tariff hike might influence Pakistan considerably as its financial system is fragile and is dealing with a number of crises, together with excessive inflation, rising gas prices, a depreciating rupee, and low international trade reserves. The textile trade is one in every of its few robust sectors, and it earns an enormous share of its {dollars} from U.S. exports. The 29 p.c tariff will now put Pakistani exporters at an obstacle. Even a small drop in orders might result in job losses and financial instability in city facilities like Faisalabad and Karachi.
Sri Lanka, nonetheless rebuilding after its 2022 financial collapse, has been slapped with the best tariff — 44 p.c — within the area. A lot of its attire factories, too might battle to remain in enterprise. The U.S. is Sri Lanka’s high attire market, accounting for over 40 percent of the sector’s complete exports, which exceeded U.S. $5.5 billion in 2023. Though Sri Lanka has had good relations with China and India lately, these international locations can not substitute the demand from American consumers in a single day. The chance of order cancellations, layoffs, and additional debt burdens has now elevated.
Smaller South Asian international locations — Nepal, Bhutan, Maldives, and Afghanistan — are additionally affected, although not as severely. These nations have decrease export volumes to the U.S., and the brand new 10 p.c flat tariff applies to all items.
Maldives exports to the U.S. comprise largely of seafood. The influence of the ten p.c tariff will depend upon whether or not American shoppers are prepared to pay greater costs for Maldivian seafood or swap suppliers. For international locations like Nepal and Bhutan, which export crafts, RMG, leather-based and tea in small portions, the priority is extra about future commerce enlargement turning into tougher.
Trump’s new tariff guidelines imply greater costs, diminished exports, and presumably job losses throughout industries. Bangladesh’s RMG sector, India’s varied export sectors, and Pakistan and Sri Lanka’s textile hubs are all in danger. Whereas some international locations might adapt over time by new markets or improved commerce offers, the short-term influence may very well be painful. The area should now act quick to guard its industries, employees, and financial future.
Nonetheless, not all hope is misplaced. Whereas South Asian exporters now face steep tariffs, their key rivals in Southeast Asia and China have additionally been affected, some much more severely. Vietnam, as an illustration, now faces a 46 p.c tariff on its exports to the U.S., together with electronics, textiles, footwear, and furnishings. Vietnam is the second largest RMG exporter to the united statesmarket. Cambodia, whose financial system closely is determined by RMG, footwear, and journey items, is dealing with an excellent greater 49 percent tariff price. Indonesia, too, has been hit with a 32 percent tariff on main classes similar to attire, electrical equipment, rubber, and palm oil merchandise. These sectors straight overlap with South Asian exports, particularly in clothes, footwear, and shopper items. This sharp rise in tariff burdens throughout the board reduces the aggressive pricing hole that beforehand gave Southeast Asian international locations an edge over South Asia.
U.S. consumers, who’re delicate to price will increase, might now view South Asian suppliers as equally or much more viable, particularly when contemplating reliability, workforce scale, and product variety.
This unintended consequence might create a gap for South Asia to retain and even develop its market share if international locations act rapidly and strategically.
Bangladesh’s RMG sector nonetheless holds a powerful international place on account of its scale, low-cost labor power, and environment friendly supply timelines. India, regardless of present headwinds, presents a broad export combine starting from prescription drugs and leather-based items to engineering and jewellery, a lot of which straight compete with Indonesian, Chinese language and Vietnamese exports. Furthermore, Sri Lanka and Pakistan, with their well-established textile infrastructure, stay important gamers if supported by favorable coverage shifts or foreign money changes.
Although uncertainty looms, the truth that international rivals are additionally being squeezed by these tariffs presents South Asia a second of relative parity — and with the best coordination, this may very well be transformed into resilience, retention, and restoration.
