New Delhi: India’s neighbours are scrambling to respond after US President Donald Trump imposed steep reciprocal tariffs, threatening key exports from Bangladesh, Pakistan and Sri Lanka. With rates as high as 44%, analysts warn of major disruptions, particularly in textiles, as governments rush to mitigate the fallout.
Trump has announced a 26% reciprocal tariff on India.
“This is one of the most important days… in American history; it’s our Declaration of Economic Independence. For years, hard-working American citizens were forced to sit on the sidelines… But now it’s our time to prosper,” Trump said while announcing the tariffs.
New tariff could disrupt Pakistan’s trade by slowing down its exports to US
A 29% reciprocal tariff has been imposed on the import of goods from Pakistan, India’s immediate neighbour.
Analysts maintained that these new tariffs could end up disrupting Pakistan’s trade by slowing down its exports in the US market.
Mustafa Pasha, Executive Director and Chief Investment Officer at Lakson Investments Limited, said that the imposition of tariffs is basically a tax on American consumers, reducing their purchasing power and lowering demand for imports.
“If the demand for Pakistani goods falls, it will be a negative for the country,” Pasha told Business Recorder.
The US is among Pakistan’s largest trading partners, and experts noted that Pakistan’s exports are largely dominated by textiles, which could be among the most affected areas.
During the first seven months of FY2025, exports to the US totalled $3.6 billion, accounting for 19% of Pakistan’s total exports. Of this, 79% ($2.8 billion) consisted of textile and apparel products.
On a post on social media, he noted that “Pakistan will hold a cost advantage over Vietnam (17%), Indonesia (3%), Cambodia (20%), China (25%) and Bangladesh (8%)”.
“Conversely, Pakistan will face a competitive disadvantage of 3% compared to India, 19% when compared with Turkey, and 6% compared to Jordan Egypt and most Central American countries,” he added.
Ali Hasanain, associate professor of economics at LUMS, told Dawn newspaper that “America is one of Pakistan’s most important trade partners, and the one with which we run the largest trade surpluses”, adding that nearly a fifth of the country’s exports were destined for the US.
He added that exports to the US were less than 1.5pc of Pakistan’s GDP.
“Even if these are entirely wiped out — which is highly unlikely — the impact will be smaller than multiple times we have shrunk our economy through our own mismanagement,” said Hasanain.
37% tariff expected to severely impact Bangladesh’s ready-made garment sector
Bangladesh, another neighbouring country sharing its border with India is reviewing its tariffs on products imported from the United States, the Chief Adviser’s Press Wing said on Thursday morning (April 3), hours after President Donald Trump unveiled a 37% reciprocal tariff on the South Asian country, reported The Business Standard.
“Bangladesh is the fifth-largest market for US cotton exports, and there is no tariff on cotton imports. The country also imports scrap from the US at a zero tariff. However, there is a 31% tariff on petroleum gas imports,” economist Mustafizur Rahman told The Business Standard.
“These are the major imported commodities. So, why is the US mentioning a 74% tariff? This needs to be clarified,” explained the economist.
The 37% tariff is also expected to severely impact Bangladesh’s ready-made garment (RMG) sector, warned former BGMEA vice president Rakibul Alam Chowdhury.
“It is a major threat for us. Our competitors, India and China, will benefit from the new tariff structure as their rates are comparatively lower than Bangladesh’s,” said Chowdhury.
Bangladeshi economist Selim Raihan told The Daily Star that beyond RMG, other industries such as leather, footwear, and pharmaceuticals, which have increasingly relied on the US market, are also at risk
Another economist, Mahfuz Kabir said that the Trade and Investment Cooperation Forum Agreement, which allows both countries to hold prompt discussions to resolve trade disputes or mitigate unforeseen negative impacts, is the only channel available for Bangladesh.
Bangladesh must proactively signal to the US that it is reviewing the situation. This message should be conveyed even before the formal review process begins, said Kabir.
“Such communication must be established very quickly,” he said.
Zahid Hussain, former lead economist at the World Bank’s Dhaka Office too said that there is an urgent need to negotiate with the US and discuss whether the data and calculations behind the 74% tariff on US exports to Bangladesh are accurate.
“We need to tackle this by expanding our trade to multiple countries with a variety of products. Previously, we discussed free trade and protectionist trade. Now, both strategies are becoming ineffective. We must adopt strategic trade policies,” former Dhaka University professor MM Akash, told United News of Bangladesh.
Highest tariff of 44% imposed on Sri Lanka, apparel industry stocks fall
Among all the South Asian countries, the highest tariff of 44% has been imposed on Sri Lanka.
The country’s labour minister Anil Fernando has said that Sri Lanka will hold negotiations with the Trump administration over the tariff rate, The Morning reported, noting that Colombo is aiming for lower tariffs citing its economic recovery under the IMF’s bailout program.
Sri Lanka’s President Anura Kumara Dissanayake has also appointed a committee to make recommendations to the government on the new US tariff system.
“President Anura Kumara Dissanayake has appointed a committee to study in depth the problems that may arise due to the new reciprocal tariffs imposed by US President Donald Trump and make recommendations to the government,” his media division said, reported economynext.
The island nation’s apparel industry has also expressed its concern over the tariff, which can significantly disrupt the country’s largest export sector and put thousands of jobs at risk.
“This tariff level is extremely high relative to our regional competitors. Sri Lanka could very quickly see its share of US business move to countries with lower tariffs than Sri Lanka,” Joint Apparel Association Forum (JAAF) secretary general Yohan Lawrence told Sunday Times.
Lawrence said that the JAAF is studying the tariffs.
Sri Lanka’s top exports to the US was $1,906 million in apparel, followed by others like tyres, coconut products and cinnamon.
Sri Lanka’s alleged 88% tax which has been used by Trump to slap a 44% discounted reciprocal tax appeared to have been arrived at by dividing the trade deficit, reported economynext.
After the tariff announcement, the Colombo Stock Market responded negatively with apparel stocks trading down from 8% to 11%.
Listed apparel stocks were trading down in mid-day trade as well.
Meanwhile, posting on X, opposition leader Sajith Premadasa said that the 44% US tariff is not just a trade issue, but a wake-up call.
“Those who are now in government in the past blocked every trade deal, distrusted globalisation, and saw investment as intrusion. That legacy must end and they have to switch up their stance,” said Premadasa.
The opposition leader also claimed that Sri Lanka needs a “strategic reset.”
“Embrace partnerships over paranoia; Stop the hate-mongering for the sake of appeasing some local cartels; Build an Asia-centric trade strategy with India, ASEAN & Bangladesh: Shift from tariffs to production-led, investor-friendly growth,” said Premadasa.
“And above all, we must stop the silent defiance of regional interests of other nations. Protecting mutual interests is the only way forward. Posturing is not strategy. Mature nations negotiate. It’s time we did too,” he further added.
