Side-effects of US SC ruling: India’s tariff edge over neighbours disappears

US SC ruling negates US tariffs

• US Supreme Court ruling ends India's brief tariff advantage.
• Indian exporters lose edge over regional peers in US market.
• Tariff rollback reduces competition for Bangladesh, Vietnam.

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While the US Supreme Court ruling eliminating higher reciprocal tariffs is a net positive for India — bringing duties back to Most Favoured Nation (MFN) levels averaging around 3 percent — it also removes a key competitive edge Indian exporters had briefly gained over regional peers.

Under the February 2 trade framework announced by US President Donald Trump and Prime Minister Narendra Modi, India’s tariff rate had been reduced to 18 percent, lower than rates faced by most South and Southeast Asian competitors. Bangladesh and Pakistan were at 19 percent, Vietnam at 20 percent, and Thailand, Indonesia and Malaysia at 19 percent each, while Sri Lanka faced 20 percent.

That differential, though narrow, had created pricing advantages in several labour-intensive sectors. With the court ruling reverting tariffs to MFN rates for all, the relative edge India held has now effectively disappeared, placing competing exporters back on equal footing.

Textiles most exposed

Textiles were the most vulnerable segment for Bangladesh and Pakistan. Bangladesh’s exposure is concentrated in knitted and non-knitted apparel, including women’s cotton skirts ($41.8 million), men’s shirts ($37 million), and women’s nightdresses and pyjamas ($22.9 million).

Pakistan’s vulnerability is even more skewed towards textiles and home furnishings. Cotton sweaters and pullovers account for $432.2 million in exports to the US, while printed cotton bed linen totals $137.4 million and man-made fibre bed linen $40.8 million.

Under the earlier tariff structure, Indian exporters could have threatened roughly 2 percent of Bangladesh’s US exports in categories where Bangladesh’s shipments were less than 30 percent higher than India’s in 2024. For Pakistan, the potential exposure was significantly larger — about 15 percent, or nearly $636 million of exports across overlapping categories.

The analysis focuses only on product lines where competing countries’ exports were at most 30 percent higher than India’s and excluded categories where Indian exporters already held a dominant position.

Food and seafood pressure in Southeast Asia

In Southeast Asia, food and seafood categories represented the key pressure points. Vietnam’s prepared and preserved shrimps and prawns, valued at $410.6 million, formed the single largest exposed category, closely followed by Indonesia’s shrimp exports at $405.3 million. Thailand faced potential exposure in processed fish exports worth $56 million, along with shrimps in airtight packaging valued at $40.4 million.

India’s scale in seafood processing, combined with its temporary tariff advantage, could have intensified competition in these segments. Vietnam also faced possible pressure in non-food categories such as electrical plugs and sockets ($98 million) and semi-precious stones ($44 million).

Overall, Southeast Asia’s relative exposure remained modest. Vietnam’s affected exports amounted to about 2.2 percent of its US shipments, with Thailand facing a similar 2.2 percent exposure, including competition in rubber and plastic articles. Sri Lanka stood out with the highest relative exposure at roughly 18 percent.

With the tariff rollback, however, these competitive pressures are likely to ease, as all exporters now face similar MFN rates in the US market.