Trump's tariff could still help India compete with South Asian neighbours

US' high 25%+ tariff on India could still help India compete with South Asian neighbours

While the 25 percent tariff imposed by the US may hurt Indian exporters' competitiveness relative to Vietnam, Indonesia, and the Philippines starting August 1, it may improve India’s standing against regional rivals such as Bangladesh, Sri Lanka, Thailand, and Cambodia, a Moneycontrol analysis shows.

India could challenge more than $5 billion worth of exports from these countries to the US, supported by its lower effective tariff burden in several product categories.

South Asia most exposed

Bangladesh and Sri Lanka are expected to be the most impacted. Sri Lanka faces a 30 percent US tariff—5 percentage points higher than India—making 18 percent of its exports vulnerable to Indian competition, the highest among the group.

Bangladesh could also face stiff pressure, with 16.8 percent of its US-bound exports, or roughly $1.5 billion, now exposed to direct competition from Indian exporters. The US imposed a 35 percent tariff on the country.

Thailand, Cambodia are less vulnerable

In contrast, Thailand and Cambodia appear more insulated despite an even higher 36 percent duty. India is expected to challenge just 6.1 percent of Thailand’s exports to the US—valued at around $4 billion—and 9.3 percent of Cambodia’s exports.

India’s competitive edge against South Asian countries is most visible in clothing and agricultural commodities. Tea and apparel, particularly trousers, t-shirts, and shirts, are areas where India could erode Bangladesh and Cambodia’s market share.

In jewellery, India could compete with Sri Lanka, which exported $208 million worth of rubies and gemstones to the US in 2024, and with Thailand, whose rubies, sapphires and emeralds exports totalled $277 million.

Thailand may also lose ground to India in categories such as plastics, industrial machinery, Christmas-related items,and shrimps. However, shrimp is one product category where India may lose out, as Vietnam, Indonesia, and the Philippines enjoy lower US tariffs of 19–20 percent, giving them a stronger pricing advantage across global markets.