Submit your Article

On April 2, US President Donald Trump introduced a new tariff rule for more than 180 countries on what he called “Liberation Day.” Tariffs are taxes levied on goods crossing international borders. Under the new rules, there will be a baseline 10 per cent tariff on all imports into the United States, with even higher rates on countries that run substantial trade surpluses with the US. In practice, when a government imposes a high tariff on a product, the cost of importing that item increases for domestic consumers. More importantly, when a massive consumption-driven economy like the US erects high tariff walls, it creates disruptions across the global trade landscape. 

Like many other regions, South Asia, a subcontinent of over 2.04bn people and a $5.3trn economy, will be severely impacted—particularly with the imposition of rather higher “reciprocal tariffs.” The policy places some South Asian countries like India (26 percent), Bangladesh (37 percent), Sri Lanka (44 percent) and Pakistan (29 percent) at a distinct disadvantage, with almost prohibitively high tariffs. At the same time, small exporters like Nepal, Bhutan, Afghanistan and the Maldives, whose trade volumes with the US have remained relatively low, face a universal 10 percent tariff, a gentle rap on the knuckles in comparison but a barrier nonetheless. While it was always an uphill battle for South Asian nations—and the Global South in general—to compete in the face of the structural inequities arraigned against them in the global export market, they now have their task cut out for them. America’s reciprocal tariffs will create new challenges for some South Asian nations seeking to export their way to prosperity and economic stability.

In 2024, India continued to dominate South Asia’s trade with the US, exporting goods worth $77.5bn while paying low average tariffs of under two percent. Meanwhile, Bangladesh, the region’s second-largest exporter to the US, faced a much steeper tariff of about 15 percent. Despite these challenges, Bangladesh’s apparel sector, primarily driven by ready-made garments, has managed to grow. Its exports to the US rose by 0.7 percent year on year, reaching $7.5bn by 2024. Sri Lanka, another major South Asian trade partner of the US, is still in the process of rebuilding after its 2022 economic collapse. It now faces the highest tariff in the region: 44 percent. This poses an extreme challenge to Sri Lanka’s export economy.
America remains Sri Lanka’s largest single-country market for apparel, accounting for over 40 percent of the sector’s total exports, which surpassed $5.5bn in 2023. These countries, which rely heavily on the US as their top export market, have been hit especially hard by both the 10 percent baseline tariff effective from April 5 and specific reciprocal tariff rates effective from April 9. Even a slight decline in orders from the US could result in job losses and economic instability, and the likelihood of order cancellations, workforce reductions and escalating debt burden.

The US is Nepal’s third-largest buyer of carpets, with imports valued at $48m in 2024. The newly-imposed 10 percent tariff could also pressure Nepali carpet exporters to either absorb additional costs or risk losing their market share to competitors. Nepal’s niche export products, including hand-knotted carpets, pashmina, RMG, leather and tea, may face reduced competitiveness in US markets, which accounted for $112m in exports in 2024. The new trade barrier could pose fresh challenges for these sectors by threatening to impact their growth and market share. However, amid the crisis, there is a potential silver lining for a country like Nepal. While Sri Lanka, India, Bangladesh, and even Nepal’s northern neighbour China risk losing their price competitiveness due to the overwhelmingly high reciprocal tariffs, Nepali manufacturers, especially large-scale and medium-scale makers of export-worthy products, can seize the window of opportunity this may open by positioning themselves as a reliable and cost-effective alternative. 

The shifting sands of American trade policy create new uncertainties for India’s diverse set of export industries, Bangladesh RMG’s sector, and the textiles hubs of Sri Lanka and Pakistan. Southeast Asian competitors like Vietnam, Cambodia and Indonesia will also be adversely affected by the high reciprocal tariffs levied on them, accounting for 46, 49 and 32 percent, respectively. China, another low-cost manufacturing competitor and the world's premier exporter, is already subjected to a 20 percent tariff due to its alleged involvement in the fentanyl trade. China will now face an additional tariff, raising the total rate to a staggering 54 percent. This sharp increase represents a major escalation in trade tensions between the US and China, the two largest economies, and it renders the international market vulnerable to significant disruptions in the flow of goods.

These changes may be compelling enough for many companies that previously focused on manufacturing in Southeast countries like Vietnam to turn to smaller South Asian countries like Nepal in order to bypass US tariffs. This could substantially benefit Nepal. The baseline rate of 10 percent imposed on Nepal—significantly lower than tariffs imposed on Vietnam, Indonesia and China—means that Nepal may have a notable competitive advantage over other Asian economies. Businesses will increasingly seek alternatives to traditional manufacturing hubs such as China and Vietnam. Nepal, benefiting from low labour costs and affordable manufacturing conditions, is strategically positioned to attract attention as a viable alternative destination within global supply chains. Brands and retailers that had outsourced production to countries like Bangladesh, Sri Lanka, and Vietnam to avoid tariffs on Chinese goods may now view those destinations as less attractive under the revised US policies. Consequently, Nepal stands to benefit considerably as companies look to diversify and stabilise their international production bases. 

By effectively leveraging its reputation for ethical manufacturing, Nepal could appeal strongly to socially-conscious consumers, particularly in North America and Europe, presenting its products as both sustainable and responsible alternatives in the global marketplace. Importantly, Nepal enjoys duty-free access to the US market for 77 specific products under the Trade Preference Program, an arrangement which remains effective until December 2025 despite recent tariff changes, and this only enhances Nepal’s attractiveness as a manufacturing and export hub. By strategically leveraging the shifting trade landscape, Nepal can position itself as a competitive and stable destination for industries to mitigate tariff-related risks. 

This cannot be achieved unilaterally, though. Nepal will need to rope in businesses and governments in its region, South Asia, by positioning itself as an attractive investment destination. Given its relative tariff advantage, manufacturers from other South Asian countries such as India, Sri Lanka, and Bangladesh can leverage Nepal as a strategic investment destination, establishing joint ventures or manufacturing facilities to lower their tariff exposure considerably in the American market. Promoting complementary manufacturing—where initial production occurs in Sri Lanka or India, for example, and final assembly or processing takes place in Nepal—can optimise the tariff differential effectively while, at the same time, ensuring that both Nepal and its South Asian partner countries have the opportunity to be involved in the supply chain. The creation of bilateral Special Economic Zones (SEZs) in Nepal can also attract South Asian and international businesses seeking tariff-efficient production locations. Nepal and individual South Asian countries should also consider initiating negotiations for a bilateral Preferential Trade Agreement (PTA), particularly targeting niche sectors like herbal products, tea, spices, textiles and handicrafts. The South Asian Free Trade Area (SAFTA), if implemented in the right spirit, can also serve as an enabler. 

While the ‘new normal’ will undoubtedly create instability and erect more barriers for South Asian exporters, it is usually possible to find a silver lining, even around the darkest clouds. This testing new phase in the life of the global economic order presents an unprecedented opportunity for strategic cooperation between Nepal and the rest of South Asia. Bolstering regional bilateral and multilateral ties is the right way to stimulate economic resilience.

The contemporary, globalized world is witnessing a great shift of power from males to females, and people have realized how aggressive, risk-seeking behaviour, which enables men to entrench power, has proven ‘destructive and unsustainable'. With this shift, various countries are moving slowly or gradually toward alternative conceptions of sustainable peace by adopting gender-inclusive, gender-balanced approaches in their activities and policies. Nepal is one of the countries in South-Asia that has recognized social and gender inequalities and is progressive, adopting inclusive laws for gender equality and promotion. According to Sapana Pradhan Malla, the Supreme Court judge of Nepal, ‘the  2015 Constitution of Nepal is one of the most progressive in South Asia in terms of gender equality and women’s rights. Furthermore, Nepal leads South Asia in women’s political participation.  

Additionally, Nepal is a signatory to the significant foundational human and women's rights treaties and conventions, namely the Universal Declaration of Human Rights (1948), the International Covenant on Civil and Political Rights in 1991, the Convention against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment in 1991. The country ratified the Convention on the Elimination of All forms of Discrimination against Women (CEDAW) in 1992. Also, Nepal is the first country in South Asia to adopt a National Action Plan to implement UN Security Council 1325 and a prominent contributor of women peacekeepers in UN missions. In this regard, Nepal can be considered well-placed and holds the potential for gender-inclusive foreign policies due to conducive domestic and international factors.

However, Nepal also depicts a bleak picture and shows a considerable gender gap in its foreign policy. The policy abides by the 2015 Constitution of Nepal, and the constitution upholds the GESI framework. However, foreign policy documents and guiding principles do not adequately reflect the same commitments. Updated four years ago, the foreign policy of Nepal considers gender, gender equality and social inclusion as cross-cutting issues for effective aid implementation rather than a priority in foreign policy formulation. It tries to address gender issues through mainstreaming without opening up to intersecting identities that are more vulnerable, marginalized  and in dire need of opportunities. Though the nation has passed through various political struggles, including the democratic struggles,  the Maoist insurgency and the Madhes movement, it is oblivious to multiple intersecting identities and contains homogeneous language about gender categories.

Examining key foreign policy documents, such as the Foreign Aid Policy 2002 and International Development Cooperation Policy 2019 showcases this gender gap. In these policies, individual donors can execute those projects that align with sectoral priorities of Nepal, which include poverty reduction, fostering economic growth and supporting critical social infrastructure needs. In these projects, social needs are not explicitly defined, nor are languages of intersectionality considered. If we try to locate gender in International Development Cooperation Policy 2019,  it comes up only twice, except for aid utilization and project design and implementation, where the policy has considered gender as one of the cross-cutting issues to improve aid effectiveness. The policy has not prioritized gender explicitly as one of the key principles/aspects. It showcases policies that deal with international affairs and external aid lack robust consideration of intersectionality, leading to the homogenization of diverse experiences and marginalization of specific individuals.

Why? There are two primary reasons, among many. First, insecurities shape Nepal's foreign policies. Usually tangled in balancing two neighbors and having survival mode policies as evident in the external policies adopted by Nepal, which include a policy of independence, a policy of isolation, non–alignment, Indo-centric unique relations, and currently, a neutral and balanced approach vis-a-vis neighbours. Nepal's foreign policy debates often revolve around its neighbors, limiting the scope and knowledge of the overall policy framework. Second, Nepal’s aspiration is for economic development rather than social development, and it aims to elevate itself to a middle-income country by 2030. Thus, the understanding of foreign policy has been limited, narrow and state-centric. It has been understood to protect national sovereignty and security against external threats and promote economic interest through its foreign policy. Therefore, considering an intersectional gender-sensitive approach looks challenging within the state-centric foreign policy.

However, Nepal’s foreign policy is critical to its development goals. For realization of the vision of ‘Prosperous Nepal and Happy Nepali’ and Sustainable Development Goals (SDGs), and the elevation to the club of middle-income countries by 2030, development aid should be channelized through citizen-centric aid policies that include the gender dimension. Non-inclusion of gender issues in the nation’s foreign policy can have serious consequences, perpetuating gender-based inequalities and hindering progress toward sustainable development. So, there is a need for Nepal to advance gender perspectives through its foreign policy and prioritize the development of marginalized communities by recognizing the existence of diverse categories of people and ensure that these groups, including women and girls, people with disabilities and senior citizens, get to enjoy their rights. For this, it is important to amend relevant policy documents and make intersectionality integral to its foreign policy.

Overall, it is critical for Nepal to prioritize social development that can contribute to sustainable development and economic prosperity. It is of utmost importance for Nepal to focus on gender aspects not only in gender mainstreaming but also to make gender a top priority area of its foreign policy and partnerships.