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Tariffs

South Asian Economists Urge Caution Amidst Global Economic Uncertainty

Strategic Insights

— 2 min read

As the global economy slows, economists from across South Asia are warning their governments to be cautious of the potential consequences of America's decision to impose country-specific tariffs that deviate from the principle of most-favoured-nation (MFN) trade. The experts, including Mustafizur Rahman from Bangladesh, Sanjay Kathuria from India, Paras Kharel from Nepal, Vaqar Ahmed from Pakistan, and Subhashini Abeysinghe from Sri Lanka, are urging policymakers in the region to prioritize medium- to long-term interests and consider the broader regional and global picture.

Key Takeaways:

  • Economists from across South Asia have urged the region's countries to avoid celebrating one another's misfortunes following America's decision to impose country-specific tariffs that deviate from the principle of most-favoured-nation (MFN) trade.
  • The CSEP-Trade Sentinel Tariff Impact Tool projects that India's exports to the US will suffer significantly, while Nepal and Pakistan are expected to record modest gains.
  • Bangladesh and Sri Lanka may experience export losses, adding to the challenges of ensuring a smooth and sustainable transition as they prepare to graduate from least-developed-country (LDC) status in 2026.
  • Economists called on countries to use the current crisis as a catalyst for domestic reform, including improving the investment climate, reducing excessive trade protection, cutting regulatory barriers, and creating better employment opportunities.
  • The economists urged pragmatism in an increasingly geopolitically charged world, arguing that South Asian nations cannot afford to sacrifice the jobs and incomes that trade generates.
  • Regional countries, including India and Pakistan, should decouple trade relations from political tensions and engage in more robust intra-regional trade to provide stability amid global volatility and integrate South Asia more deeply into global value chains.
  • South Asia should pivot towards Asia's growth centres, seeking to tap into East Asia's dynamic supply chains and rising demand, including imports from the region estimated to reach $9 trillion in 2024.
  • Closer integration with Central Asia could help diversify supply chains, secure energy flows, and open new markets across Eurasia.
  • The group called for renewed efforts to strengthen multilateral institutions, particularly the World Trade Organisation (WTO), which has long underpinned the global rules-based trading system and offered special provisions for least-developed countries.

Statistics:

  • The CSEP-Trade Sentinel Tariff Impact Tool projects that India's exports to the US will suffer a combined 50 per cent tariff (25 per cent reciprocal plus 25 per cent punitive).
  • Nepal and Pakistan are expected to record modest gains, while Bangladesh and Sri Lanka may experience export losses.
  • Imports from East Asia are estimated to reach $9 trillion in 2024.
  • South Asia's least-developed countries, Bangladesh and Nepal, are set to graduate from LDC status in 2026.
  • The WTO has offered special provisions for least-developed countries and given smaller economies a platform for representation.

Sources:

  • Economists from across South Asia, including Mustafizur Rahman from Bangladesh, Sanjay Kathuria from India, Paras Kharel from Nepal, Vaqar Ahmed from Pakistan, and Subhashini Abeysinghe from Sri Lanka.
  • The CSEP-Trade Sentinel Tariff Impact Tool.
  • The World Trade Organisation (WTO).
  • Various news sources.

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