India-US Trade Pact Puts $2.6 Billion of South Asian Exports to US at Risk

The India-US trade deal announced on February 2, 2026, has significantly altered the competitive landscape for South Asian exporters to the American market.  

The agreement reduces reciprocal tariffs to 18% from the previous 50%, giving Indian exporters a decisive advantage. 

Impact on South Asian Exports 

As per Moneycontrol report, nearly $2.6 billion worth of South Asian exports to the United States could face pressure as Indian exporters gain a tariff edge over regional peers.  

Pakistan, Sri Lanka, and Bangladesh risk losing competitiveness in over 10% of their exports to the US in product categories where India already has significant export presence. 

Tariff Differentials 

India's effective tariff after the deal falls to 10.7%, well below Bangladesh's 19.9%, Sri Lanka's 19.1%, and Pakistan's 18.2%.  

This positions India favourably compared to most South Asian economies and even some Southeast Asian nations like Indonesia (16%) and Vietnam (12.5%). 

Sector-Specific Vulnerabilities 

Bangladesh faces particular exposure in garments and home textiles, Pakistan in bed linen and cotton products, and Sri Lanka in apparel and rubber-based goods. These labour-intensive sectors with thin profit margins are most sensitive to tariff changes. 

Read More: India, US Agree on Trade Deal, Lowering Reciprocal Tariffs to 18%! 

Regional Implications 

While Southeast Asian exporters like Vietnam and Thailand are partly cushioned by diversified export baskets, South Asian economies remain heavily concentrated in labour-intensive segments where India's scale, tariff advantage, and improving logistics could quickly displace competitors. 

Conclusion 

The India-US trade deal has reset tariff relationships in the region, giving Indian exporters a significant advantage. This shift may reinforce India's position as the preferred South Asian supplier in the US market, while neighbouring countries face challenges in defending their export shares. 

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