Key Highlights:
• The new US tariff policy, effective April 5, 2025, imposes a 10% universal tariff with additional reciprocal rates, disproportionately affecting South Asian exporters.
• Nepal, facing only a 10% tariff—lower than India (26%), Bangladesh (37%), and Sri Lanka (44%)—stands to gain in sectors like carpets and textiles.
• While the policy could open market space for Nepal, infrastructure and export capacity challenges must be addressed to fully seize this opportunity.
A New Trade Landscape in South Asia
A dramatic shift in US trade policy is set to reshape export prospects across South Asia. Starting April 5, 2025, the United States will impose a 10% universal tariff on all imported goods, followed by additional reciprocal tariffs from April 9, 2025, based on how countries tax American exports. These changes, announced by President Donald Trump, are intended to correct perceived trade imbalances. But for South Asia’s export-driven economies, the fallout could be significant—and uneven.
Below is a table showing reciprocal tariffs targeting South Asian nations vary widely:
• India: 26%
• Pakistan: 29%
• Bangladesh: 37%
• Sri Lanka: 44%
• Nepal: 10%
• Bhutan: 10%
• Maldives: 10%
These figures indicate that Nepal, Bhutan, and the Maldives, which have lower existing tariffs on US imports, are spared from higher reciprocal tariffs, unlike their larger neighbors.
The disparity may drive trade diversion, where US buyers shift sourcing to countries with lower duties—like Nepal—especially in sectors such as carpets, textiles, and light manufacturing.
Nepal: A Potential Beneficiary
For Nepal, this policy shift may come as a rare geopolitical windfall. As the Nepal Trade Preference Program (NTPP)—which has provided duty-free access for 66 product categories since 2015—is set to expire by December 2025, concerns had grown over the sustainability of Nepal’s US export performance. (Reads :Office of the USTR).
Now, under the new tariff structure, Nepal faces the same 10% duty it imposes on American goods. This uniform rate, while not ideal, is significantly lower than those levied on its regional competitors. As a result, Nepalese products may become more attractive to American importers.
According to OEC, Nepal’s key US exports in 2023:
• Hand-knotted carpets – $54.2 million
• Animal food products – $24.5 million
• Textile articles – $10.3 million
In January 2025, Nepal’s exports to the US totaled $9.22 million, indicating steady trade activity, though slightly lower than in 2023, possibly due to global market fluctuations, as per Trading Economics.
With competitors facing 2.5 to 4.5 times higher tariffs, Nepal now enjoys a relative edge in pricing and access.
South Asia’s Diverging Fortunes
This policy is likely to ripple across the region, aggravating existing economic vulnerabilities:
• Bangladesh, heavily dependent on textile exports, faces a 37% tariff, endangering its competitive edge.
• India, with a 26% tariff, may see cost increases in pharmaceutical and apparel exports, impacting its global trade standing.
• Sri Lanka, struggling with economic instability, is hit hardest with a 44% tariff, further straining its export sectors.
These high tariffs could lead to retaliatory measures, as South Asian nations have historically responded to US trade restrictions with counter-tariffs.
Infrastructure, Not Just Tariffs, Will Define Nepal’s Gains
While the tariff advantage is real, it comes with critical challenges:
• Weak infrastructure – Nepal’s road and export logistics remain underdeveloped
• Limited manufacturing capacity – Nepal must scale up production to meet potential demand
• Uncertain investment climate – Without policy stability, foreign investors may hesitate
Without strategic improvements, Nepal may struggle to maximize this opportunity.
Conclusion: A Window of Opportunity
The US tariff overhaul poses significant threats to South Asian export giants, yet Nepal emerges as an unexpected beneficiary. With a low, reciprocal 10% tariff, Nepal stands a real chance of strengthening its position in the American market, just as the NTPP phase-out approaches.
However, securing long-term gains requires more than just favorable tariffs. Nepal must upgrade infrastructure, enhance trade facilitation, and expand industrial capacity. Without these improvements, Nepal risks missing out on a pivotal moment in global trade dynamics.
If Nepal acts swiftly and strategically, this policy shift could mark the beginning of a new era in Nepal-US trade relations—an opportunity not to be wasted.
Freelance Writer
