Global trade has witnessed renewed turbulence following US President Donald Trump’s return to the White House. His protectionist tariff policy—an attempt to rewrite the global trade system—has unsettled many nations. As a result, analysts now describe US trade policy under Trump as increasingly unpredictable. In April, President Trump announced additional import tariffs targeting most countries, only to defer their implementation for 90 days. The situation, especially regarding trade with China, has grown increasingly complex. On Thursday, the White House issued a presidential executive order titled “Further Modifying the Reciprocal Tariff Rates”, imposing steep tariffs on several countries. Notably, Nepal was excluded from this list—a development that experts say presents a window of opportunity. According to trade analysts, the 10% tariff imposed on Nepal back in April remains unchanged. Compared to the increased tariff rates imposed on neighbouring countries by the Trump administration, Nepal’s rate is relatively modest. This gives Nepal a potential competitive edge. For example, India faces a 25% tariff, Bangladesh and Sri Lanka 20%, Pakistan 19%, and Afghanistan 15%. These higher tariffs will raise the price of goods from these countries, making Nepal’s products comparatively more attractive. However, without a concrete strategy to utilize this advantage and without boosting exports, such preferential treatment may hold little value, given the fact that Nepal has historically failed to capitalize even on the existing trade preferences granted by the US.
Nepal has recorded a consistent trade deficit with the US since 2005, when quotas on garment exports were removed following the expiration of the Multi-Fibre Agreement. This ended Nepal’s access to quota-based trade preferences, weakening its growing apparel export sector and causing a gradual decline in the US market share. Today, as high tariffs burden Nepal’s competitors, the US market is once again opening up. If Nepal can reduce its production costs, its goods and services stand a strong chance of succeeding in that market. For that to happen, both government and private sector actors must identify and promote export-ready products. Major export items from Nepal include medicinal herbs, handicrafts, pashmina, ready-made garments, carpets, tea and wooden products. Interestingly, one of Nepal’s most notable exports to the US is churpi (hardened cheese) for dogs, with around 1,000 tons exported annually. Labour-intensive goods such as carpets, garments, Dhaka fabric, and herbal products could regain attractiveness in the US market as competition from high-tariff countries weakens. Nepal’s advantages include low labor costs, duty-free access to 77 goods under a special trade facility and existing market access.
A silver lining around dark clouds
But potential alone is not enough—preparation is equally vital. While the opportunity may exist in principle, seizing it in practice is far more challenging. Nepal still relies heavily on India or third countries for raw materials used in garment manufacturing, driving up production costs. Other significant obstacles include limited production capacity, a shortage of skilled labor and inadequate adoption of technology. Nepal’s investment climate also remains unstable due to inconsistent policies. The government has yet to guarantee tax incentives, infrastructure support and reforms in labour laws. Domestic investors too face difficulties due to labor unrest, policy volatility and infrastructural bottlenecks. To truly harness this opportunity, Nepal must focus on technical upgradation, quality branding and timely export strategies. Nepal signed a Trade and Investment Framework Agreement (TIFA) with the U.S. in 2011. Following the 2015 earthquake, the US introduced the Nepal Trade Preference Program (NTPP) in February 2016, offering duty-free access for 77 Nepali products. However, this facility is set to expire in December this year. Nepal must urgently pursue diplomatic efforts to extend the program. Furthermore, Nepal should not view initiatives like MCC solely as infrastructure projects but as platforms for long-term trade and investment partnerships. To secure further trade cooperation from the current US administration, Nepal needs a clear strategy, a comprehensive export promotion plan and close collaboration with the private sector. With strategic thinking, robust policymaking, and creative vision, Nepal can turn this uncertainty into opportunity.
