Kathmandu. US President Donald Trump’s administration has implemented reciprocal tariffs since April, disrupting global trade. The tariffs he has introduced are seen to have an impact not only on powerful countries but also on Nepal.
The reciprocal tariff policy issued by the US will especially affect goods exported from Nepal to the United States. According to the ‘like for like tariff’ (reciprocal tariff) announced by Trump last week, Nepali goods exported to the US will be subject to an additional 10 percent tariff. This will make Nepali goods more expensive than before.
But Trump has announced that countries that export similar goods will be subject to very high tariffs. Therefore, goods exported from Nepal will become cheaper compared to those countries, and Nepal will gain a competitive advantage. Nepali ready-made garment industry (garments) and handicrafts have been exported from Nepal to the US.
Nepal has been exporting garment products, especially shoes, T-shirts, shirts, jackets, pashmina, and other fabrics, to the US. Due to the reciprocal customs policy, the export of these products may increase.
Nepal’s garment industry in the US is continuously growing. According to the Trade and Export Promotion Center, in the last fiscal year 2080/81, Nepal exported more than 400 items worth a total of Rs 17.31 billion 45 million to the US.
In the same fiscal year, Nepal imported goods worth Rs 19.48 billion 24 million from the US. In the first six months of the current fiscal year, Nepal exported goods worth a total of Rs 8.63 billion, while Nepal imported Rs 12.23 billion from the US during the same period.
According to 2020 data, Nepal exported garments worth more than $300 million to the US annually. The recent US reciprocal customs policy has shown that Nepal’s customs duties may be lower than those imposed on other exporting countries, which has shown a strong possibility of creating trade opportunities for Nepal and increasing exports.
According to experts, Nepal will get new opportunities to compete in the US market. If Nepal can provide cheap and quality products to the US, the level of trade between the US and Nepal may increase.
The Trump administration’s statement
The US has been accusing other countries of imposing higher tariffs on American goods than the tariffs imposed by the US. It seems that the US government has announced a tariff rate in return.
The US government says that Nepal has imposed an average of 10 percent tax on American goods, and that Nepali goods have been taxed equally. US President Trump has made his views public through social media that even though countries like Bangladesh, India, China and Sri Lanka have imposed higher tariffs, the US has imposed lower tariffs.
According to the new policy of the US government, 26 percent tax has been imposed on India, 37 percent on Bangladesh, and 44 percent on Sri Lanka. In the case of China, the new rate will not be implemented as the Trump administration has already imposed a 20 percent tax, according to US media reports.
What should be done now?
Pashupati Dev Pandey, President of the Nepal Ready-Made Garment Industry Association, says that it is positive that Nepal is subject to an extremely low tariff rate of 10 percent issued by the US government.
Pandey said, ‘The US has imposed an additional 10 percent tariff. This is the minimum. Being able to fall within that is ultimately acceptable and welcome. Even though the current tariff is 10 percent, exports have become more expensive than before. However, it is much lower than other countries. There is a possibility that this rate may be reviewed after further discussions with the US government.’
According to him, this has been taken positively because while tariffs of up to 47/49 percent have been increased in other countries, only 10 percent have been imposed in Nepal. According to him, now the US will impose an additional 10 percent customs duty on not only garments but also all export goods.
According to him, there is a possibility that demand for goods from Nepal may increase due to the low US customs duty. He said that many sellers are now coming in contact.
According to him, it seems that investment in Nepal’s garment industries may also increase. After the demand is high, production should be done accordingly and sufficient manpower is also required for that, so many people can get employment within the country.
He said that even though the products were cheap before the implementation of the new customs rate, there were few buyers, but now many have started coming. According to him, there were no buyers before the implementation of the new customs rate. It seems that they are attracted now. The customs rate has increased in Sri Lanka, Bangladesh, Maldives, Italy, and other countries, and in Nepal, it is very low.
Pandey says that to promote the garment sector, the Nepal government should also create an environment for the use of raw materials available in different parts of the country. According to him, the government should play an important role in establishing industries, and if the government is ready to add facilities to SEZs, this export-oriented sector can flourish.
He said, “The investment coming into this sector will be investment with exports, not a single piece is sold in Nepal. Everything will be exported abroad. If foreign investment comes into this sector, will the government give tax exemptions? It is important to think. It seems that employment opportunities and economic indicators will increase a lot from this sector. Today, the total export is 157 billion. A single company in the US is doing a bigger business than that. In this situation, if such people want to attract and set up industries in Nepal, it is a big opportunity for the state.”
According to Pandey, who is also a young entrepreneur, the garment sector is the only sector that can make the youth self-reliant at a time when youth are migrating abroad. In the last fiscal year, ready-made garments were worth more than 10 billion. Of that, goods worth 3 billion were exported to the US.
The new tariffs are likely to significantly increase exports. According to him, handicrafts, dog and cat food, fur, pashmina and other goods are going to the US. Pandey, who is also a member of the Export Committee of the Federation of Nepalese Chambers of Commerce and Industry, says that exports of these items may increase in the coming days. It is necessary to increase investment in these sectors.
He believes that the government should now provide tax exemptions and remove policy complications for the development of these sectors. According to him, there is a problem now when there is a single customs policy for exporters and importers.
An automatic pricing system should be implemented. Facilities should be provided in SEZs, and if foreign investment comes to Nepal, Nepal should make it easy for them to repatriate profits. Issues related to maritime access and connectivity were raised at the recent BIMSTEC meeting.
It is necessary to take all these together and take advantage of them by working together with neighboring countries.
प्रतिक्रिया दिनुहोस्