South Asia faces US' steep tariff challenge

Washington's "reciprocal tariffs" have thrown up serious challenges for South Asian economies where the textile and garment sectors serve as a cornerstone of their economies, experts say.

The tariffs imposed by the United States will not only significantly reduce these South Asian countries' export earnings, but also negatively affect their employment and economic growth rates, they said.

Tahir Farooq, editor-in-chief at Daily Ittehad Media Group and Pakistan Economic Net, said with increased US tariffs disrupting exports and supply chains, the cost of doing business for South Asian manufacturers, particularly the apparel industry, will rise significantly.

"This will not only hurt their competitiveness in the global market but also lead to inflation, job losses, and slow economic growth across the region," he said.

"Rather than encouraging healthy global competition, the US seems more focused on creating artificial barriers."

US President Donald Trump announced a 26 percent "discounted reciprocal tariff" on India on April 2, saying it is nearly half of India's levies on US goods.

At the same time, he slapped a 30 percent tariff on Pakistan's exports, a 37 percent tariff on those from Bangladesh, and an even higher 44 percent tariff on goods from Sri Lanka.

Local media reported that apparel manufacturers in these South Asian countries were shocked by the steep tariff hikes, which will be a heavy blow to the textile industry that constitutes an important part of the economy of these nations.

Even though earlier this month, Trump abruptly announced a 90-day pause on the sweeping "reciprocal" tariffs he unveiled, exporters from these countries still face major uncertainty.

Bangladesh, for example, ranks as the second-largest producer of ready-made garments in the world, according to the Foreign Investors' Chamber of Commerce & Industry, a business network in Bangladesh. The sector contributed over 80 percent of the country's total export earnings and provided job openings for over 4 million workers in 2023, local media reported.

"There will be a huge impact on our garments and leather industry. If the US keeps continuing the tariffs after 90 days, lots of garment industries will be shut down," General Secretary of the Bangladesh Association of Hong Kong Ashfaqur Rahman Palash told China Daily.

The US measures "could significantly hurt exports, particularly the ready-made garments sector, the backbone of Bangladesh's economy", Selim Raihan, executive director of the South Asian Network on Economic Modeling, was quoted as saying by the Daily Star of Bangladesh.

Pushing up costs

Raihan, a professor of economics at Dhaka University, added: "A tariff hike on Bangladeshi apparel could push up costs for US buyers, potentially leading to fewer orders and shifts in sourcing strategies."

Statistics from Bangladesh's Export Promotion Bureau show the US, as Bangladesh's largest export destination, accounts for 18.7 percent of its total ready-made garment exports.

Sri Lanka's textile exports represent $4.7 billion of the island nation's earnings in 2024, according to the Joint Apparel Association Forum Sri Lanka. About 40 percent of the country's total apparel exports, which totals $1.9 billion, were bound for the US last year.

Ananda Goonatilleke, president of the Sri Lanka-China Friendship Association, said that following the announcement of reciprocal tariffs in early April, cancellations of orders in the garment sector by US buyers have already begun to adversely impact Sri Lankan industries.

He said hundreds of thousands of Sri Lankan citizens are in danger of losing their jobs due to the fallout from the new US tariffs.

As apparel factories face reduced production, shrinking exports, and tightening financial conditions, the livelihoods of ordinary Sri Lankans are now at risk, Goonatilleke added.

Pakistan's textile industry comprises about 8.5 percent of the country's GDP and employs around 40 percent of its labor force, government figures show. In the 2024 fiscal year, the country's textile exports to the US exceeded $5 billion, accounting for about 90 percent of its total exports to the country.

Aadil Nakhoda, an economist at the Institute of Business Administration, Karachi, told The Truth International, an English language publication, that the country's textile sector would face huge short-term challenges. He suggested Pakistan should expand textile exports to the European Union and other alternative markets.

Last year, as the largest destination of Indian textile exports, the US accounted for $10 billion, or 28 percent of the nation's textile exports, according to India's Ministry of Commerce.

"The increased cost of imported textiles in the US market could lead to a contraction in overall demand, as these expenses are potentially passed on to American consumers," Sivaramakrishnan Ganapathi, vice chairman and managing director of Gokaldas Exports, a manufacturer and exporter of apparel, was quoted as saying by India's Economic Times newspaper.

vivienxu@chinadailyapac.com