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In today’s global economy, tariffs have evolved from mere protectionist barriers to tools of geopolitical strategy. The US-China tariff war, which began during Donald Trump’s first term in 2018, has already brought about a decisive shift in global trade flows.

The latest US decision to extend targeted tariffs on selected Indian goods has been framed as a ‘leveling measure’. Yet, it has also created new impetus for India to deepen market access discussions with Washington and strengthen its position as a reliable trading partner. This move could be a catalyst for India to negotiate more favorable long-term terms by demonstrating its manufacturing flexibility.

Nepal also has many goods on the top list of goods imported from neighboring India. This means that the new US customs policy will inevitably have an impact on Nepal-India trade and the overall economy of Nepal. After the upgrade to a developing country, Nepal’s preferential market access facility (GSP) period has expired and the country has started to face a 10 percent customs duty, which seems to be an opportunity for the country not to increase it.

After this, it can be expected that investment will flow into Nepal from abroad and exports will increase. A large part of Nepal's trade—both exports and imports—depends on India. According to the data of the Customs Department, 64 percent of Nepal’s imports in the fiscal year 2024-25 came from the Indian market.  Similarly, India accounted for 67 percent of total exports. Since this is the case, changes in the US-India trade policy are certain to affect Nepal.

The US has imposed a 50 percent reciprocal tariff on India and a 10 percent tariff on Nepal, which is expected to give Nepal a competitive advantage in trade, but Nepal needs to take concrete steps from product development to export promotion to produce the quantities it can export to the US.

Looking at the past, the US is Nepal’s second largest export destination after India. Nepal exported goods worth Rs 18.32bn to the US in 2024-25, which is six percent more than the previous year.

This should be taken as an encouraging and positive step. In addition, to make all this sustainable and increase further, it is necessary and imperative for Nepal to create a joint mechanism between the government and the private sector to reduce transshipment risks and take advantage of customs rates.

There should be no delay on this front. The US has imposed only 10 percent reciprocal customs duty on Nepal. In such a situation, if trade negotiations with India fail and a 50 percent customs duty is imposed on India, there will be a 40 percent difference in customs rates between Nepal and India.

Even if the recently-imposed additional 25 percent customs duty is withdrawn, the difference in customs rates between these two countries will be 15 percent. Even a 15 percent difference in customs rates is very large in international trade. Nepal should be able to use this situation to its advantage.

Nepal’s main exports to the US are woolen carpets, rugs, ready-made garments, felt goods, clay and other metal utensils and handicrafts. In addition, apart from India, the US has imposed a 19–20 percent customs duty on other countries in the region—Bangladesh, Pakistan and Sri Lanka—which gives Nepal a competitive advantage.

In short, India has been exporting more goods such as carpets, textiles and rugs to the US than to Nepal. Similarly, Bangladesh is the largest exporter of ready-made garments in South Asia.

And, the US is also importing from it. Nepal also uses Indian land for trade with third countries. Although the trade war between India and the US could also bring uncertainty to Nepal’s trade routes with third countries, its likelihood is low.

The new US tariff policy seems to make Indian goods more expensive in the US market. As a result, Indian manufacturers may have to restructure their production systems. If India starts losing the US market, the Nepali market will also become more expensive, given chances of India adopting a policy of reducing production. Most of the industries operating in Nepal import raw materials from India and this means our production costs may go up. Machinery parts, industrial equipment, clothing and agricultural products from India are most likely to become more expensive in Nepal, exposing the Nepali populace to the risk of a high inflation. 

In addition, the Indian rupee will weaken further as India’s exports are affected and dollar income decreases. This problem will be further complicated by the fact that Nepal’s currency is ‘pegged’ with the Indian currency. This is also the reason why Nepal’s monetary policy has not been independent.

This will naturally have an impact on the Nepali rupee. As a result, not only will Nepal’s dollar income decrease, payments will also become more expensive. In that case, the interest on foreign loan assistance will be expensive and so will the repayment.

The Nepali market may also benefit from the Indo-US trade war. If Indian products cannot enter the US market easily, India may adopt a policy of reducing prices and seeking alternative markets. Nepal can benefit from that. If India adopts this policy, the price of Indian goods imported into Nepal, such as food, industrial raw materials, and machinery parts, may decrease. According to public data, Nepal currently exports ready-made garments worth around Rs 4bn to the US. There is no doubt that this is likely to increase many times over in a few years if the existing customs duty remains in place.

If this policy works in the long term, the ‘backward forward linkage’ of the export-oriented Nepali industry is certain to become even stronger. After the 2015 earthquake, the US had given Nepal preferential market access to 77 different items. The Nepal government should take the initiative for similar preferential market access. For now, it is too early to analyze how Trump’s policies will pan out. But if implemented, India’s export earnings will decrease. The direct impact of this will be a decrease in dollar income for India as well as Nepal, making foreign payments expensive. This will ultimately mean a surge in inflation. There is also the danger of the US aggressive ‘tariffs’ triggering a global economic recession. 

A cargo plane experienced an engine fire on Tuesday while landing in Chennai. The aircraft, arriving from Kuala Lumpur, was safely brought down, and the fire on its fourth engine was promptly extinguished by fire tenders. No injuries were reported, according to Firstpost.

Separately, a passenger plane caught fire after an accident at Kalispell City Airport in Montana on Monday. The pilot and three passengers survived, with only two sustaining minor injuries.

In related news, Air India announced the suspension of Delhi-Washington DC flights due to a temporary fleet shortage amid retrofitting of Boeing 787-8 aircraft and operational challenges caused by continued closure of Pakistani airspace, Firstpost reported.

The United States has designated the Pakistan-based Balochistan Liberation Army (BLA) as a “foreign terrorist” organization, expanding its 2019 terrorist listing to criminalize any support from within the US, according to Al Jazeera.

US Secretary of State Marco Rubio said the step reflects the Trump administration’s commitment to fighting terrorism. The BLA, also known as the Majeed Brigade, has carried out deadly attacks, including a March train siege in Pakistan’s Balochistan province. The group seeks independence, accusing Islamabad of exploiting the resource-rich but impoverished region.

The move follows similar action against The Resistance Front, tied to Lashkar-e-Taiba, after an attack in Indian-administered Kashmir, Al Jazeera reported.

Following the US imposing a 50 percent tariff on Indian goods, calls to boycott American brands like McDonald’s, Coca-Cola, Amazon, and Apple are rising in India. Business leaders and supporters of Prime Minister Modi are urging people to choose local products and support Indian businesses, according to Reuters.

India remains a key market for US companies, but the push for self-reliance and “Made in India” products is gaining momentum. Modi has encouraged prioritizing domestic needs, while groups linked to his party hold rallies promoting nationalism through buying Indian.

Despite the tensions, some consumers continue to use US brands without concern, separating politics from daily life, Reuters reported.

India has voiced serious worries about China building a massive hydropower dam on the Yarlung Tsangpo River in Tibet—the source of the Brahmaputra. The project, first announced in 1986, could threaten water security, ecology, and livelihoods across South Asia, Firstpost reported.

The Indian government is closely watching the development and has urged China to be transparent and consult downstream countries. India also wants hydrological data sharing, which China has stopped during important monsoon periods.

The river flows through sensitive, earthquake-prone Himalayan areas before reaching India and Bangladesh, making environmental impacts potentially severe. India and China continue talks, but India stresses the need for cooperation to protect the region’s people and ecosystems, according to Firstpost.

The Indian Air Force (IAF) has urged the government to sign a direct deal with France to acquire more Rafale fighter jets, accelerating its long-pending plan to procure 114 multi-role fighter aircraft (MRFA). Most of these jets are expected to be produced domestically under the ‘Make in India’ initiative in partnership with foreign manufacturers, Firstpost reported.

According to government sources, the IAF will soon seek initial approval for the MRFA project from the Defence Acquisition Council, led by Rajnath Singh. A source confirmed the urgent need for additional Rafales to address the shrinking number of fighter squadrons. The government will make a final decision once the project reaches the council for approval.

India’s Air Chief Marshal Amar Preet Singh confirmed that Indian forces shot down five Pakistani fighter jets and one additional military aircraft during the May clashes. India’s S-400 air defense systems played a key role, also targeting surveillance planes and F-16s at Pakistani airbases, according to Al Jazeera.

The conflict began after an attack killing 26 tourists in Kashmir’s Pahalgam in April. Pakistan denies losing aircraft and claims it shot down six Indian jets, which India rejects.

Despite a ceasefire, violence continues in Kashmir, with recent reports of casualties on both sides, Al Jazeera reported.

Russian President Vladimir Putin on Friday briefed the leaders of China, India, and several allies on his recent talks with US President Donald Trump’s envoy over ending the war in Ukraine, Reuters reported.

The calls followed Putin’s meeting in Moscow with envoy Steve Witkoff, after which the Kremlin said a Putin–Trump summit could be held as early as next week. Trump has given Moscow a deadline to agree to peace or face new sanctions.

China’s Xi Jinping welcomed the dialogue, while India’s Narendra Modi thanked Putin for the update despite facing new US tariffs over Russian oil imports. South Africa’s Cyril Ramaphosa backed peace efforts, and UAE leader Sheikh Mohammed bin Zayed offered his country as a possible summit venue, according to Reuters.

Putin also shared the developments with Belarus, Kazakhstan, and Uzbekistan.

India has paused planned purchases of US weapons, including Stryker combat vehicles, Javelin missiles, and six Boeing P8I aircraft, after President Donald Trump raised tariffs on Indian exports to 50 percent over its imports of Russian oil, according to Reuters.

Defense Minister Rajnath Singh’s trip to Washington to seal the deals has been cancelled. Officials say talks could resume once there’s clarity on tariffs, but no movement is expected soon.

While broader military cooperation with the US continues, the dispute has slowed India’s shift from Russian to Western arms, even as Moscow pushes new defense offers, Reuters reported.

US President Donald Trump indicated on Wednesday that China could face new tariffs similar to those recently imposed on India due to continued purchases of Russian oil. Trump recently added a 25 percent tariff on Indian goods, citing its ongoing energy trade with Russia.

When asked about extending sanctions, he said, “We did it with India. We’re probably doing it with a couple of others. One of them could be China”, Reuters reported.

While China was not mentioned in the official order, Treasury Secretary Scott Bessent had earlier warned Beijing of potential penalties if it continued buying Russian oil.

Just hours after raising tariffs on Indian imports to 50 percent, US President Donald Trump warned of potential secondary sanctions on India for continuing oil trade with Russia, Firstpost reported .

When questioned about why India was being targeted while others like China also buy Russian oil, Trump said, “It’s only been eight hours. Let’s see what happens,” hinting at more sanctions to come.

The warning comes amid rising US pressure on countries to reduce economic ties with Russia over the war in Ukraine. Asked whether a future Russia-Ukraine peace deal could reverse the new tariffs, Trump said the decision would come later, according to Firstpost.

US President Donald Trump has announced a 100 percent tariff on imported computer chips and semiconductors, aiming to push global tech firms to shift production to the United States. Companies manufacturing within the US will be exempt, according to Firstpost.

The move is expected to raise prices on electronics, cars, and other tech-driven goods. It comes alongside a separate decision to double tariffs on Indian imports to 50 percent, in response to India’s continued oil trade with Russia.

The new tariffs will take effect in 21 days, giving time for negotiations. Trump’s approach marks a shift from subsidy-led strategies to using tariffs as economic leverage, Firstpost reported.

India has strongly criticised the United States for imposing additional tariffs on its exports, calling the move “unfair, unjustified and unreasonable.”

In a statement on Tuesday, the Ministry of External Affairs of India said the new tariffs—linked to India’s oil imports from Russia—undermine its efforts to secure affordable energy for its 1.4bn citizens.

“It is extremely unfortunate that the US has targeted India for actions other countries are also taking in their national interest,” the statement said.

India added it would take necessary steps to safeguard its national interests.

The Trump administration announced a 25 percent  hike on Indian goods, bringing total tariffs to 50 percent, with the new rates set to take effect by August 27.

President Donald Trump has announced a 25 percent tariff increase on Indian imports, raising the total duty to 50 percent, in response to India’s continued purchase of Russian oil. The move, set to take effect on 27 August, is aimed at pressuring countries to cut ties with Moscow over its actions in Ukraine, according to BBC.

India called the tariff “unfair and unjustified”, saying it buys Russian oil to meet its energy needs after traditional supplies were diverted. Delhi warned it will take necessary steps to protect its interests.

Experts say the hike could cut Indian exports to the US by up to 50 percent, straining trade ties between the two partners, BBC reported.

The Philippines has granted visa-free entry to Indian tourists for up to 14 days, while India will offer free e-visas to Filipino visitors. Direct flights between Delhi and Manila are also expected soon, according to Firstpost.

India’s PM Modi welcomed the move, calling it a step towards stronger ties. The MEA said the measures will boost tourism, trade, and cultural exchange.

With the Philippines added, Indian passport holders now enjoy visa-free access to 30 countries, including Thailand, Malaysia, Kenya, and Nepal. Another 28 countries, like Indonesia, Maldives, and Sri Lanka, offer visa-on-arrival, Firstpost reported.

India’s Prime Minister Narendra Modi will visit China to attend the Shanghai Cooperation Organisation (SCO) Summit in Tianjin from August 31 to September 1, according to CNN.

This marks his first trip to China since ties between the two countries soured following the 2020 border standoff in Ladakh, which included the deadly Galwan Valley clash. Further updates are expected as the situation develops.