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US President Donald Trump has announced a steep 50 percent tariff on imports from India, effective Aug 27, a move economists say marks another escalation in Washington’s trade war tactics.

The tariffs do not stop with India; Bangladesh, Pakistan and Sri Lanka have also been hit with higher rates. Nepal, however, faces a comparatively modest 10 percent tariff. Economic experts believe this lower rate could give Nepal a temporary edge in the US market, especially in products like hand-knotted carpets and readymade garments. But they caution that the benefit will only materialize if Nepal can ramp up production.

According to the Department of Customs, Nepal exported goods worth Rs 18.32bn to the US in the last fiscal year, while imports from the US reached Rs 25.97bn, leaving Nepal with a trade deficit of more than Rs 7bn. The US is Nepal’s second-largest export destination after India, with roughly 320 products shipped to the world’s largest economy annually.

Former Finance Secretary Chairperson of High-Level Economic Reforms Advisory Commission, Rameshore Khanal, believes higher tariffs on Indian goods could push some US buyers toward Nepal. India sends about 18 percent of its exports to the US, including garments and pharmaceuticals. If those products become more expensive, Nepal could see new demand for similar items, he added.

“Bangladesh and India will struggle to compete in garments if their export tariffs to the US remain double or more than Nepal’s,” Khanal said. “This could also attract foreign investors to set up manufacturing in Nepal to take advantage of the lower rate.”

Still, a recent study by the South Asia Watch on Trade, Economics and Environment (SAWTEE) warned that Nepal’s advantage might be short-lived, as the US could change its tariff policy if it signs new trade deals with larger economies. The study, titled “Decoding US’ Reciprocal Tariff: A Nepal Perspective”, urges Nepal to prepare a long-term trade strategy, improve the investment climate, diversify export markets and expand its product base to reduce foreign trade risks.

Industry leaders say the immediate impact on Nepal will be minimal, as the US tariffs target finished goods exported from India, not raw materials that may be re-exported via Nepal. “Only if global prices of certain goods rise will Nepal feel the effect,” said Akash Golchha, executive member of the American Chamber of Commerce in Nepal. “It will only be a problem for India because the revised rate applies to them.”

According to Golchha, even if a product is an American brand, if it is manufactured in India and sent to Nepal, it makes no difference. “This is for finished goods, not raw materials. If India imports raw materials from the US, manufactures them, and sends them to Nepal, there is no duty on that,” he said. “Since the US has raised tariffs only on India’s exports, goods going from Nepal will not be affected.”

Still, the shift in trade flows could lower prices for some imports into Nepal, as Indian manufacturers look for alternative markets to offload goods originally intended for the US.

Kshitij Dahal, senior research officer at SAWTEE, also said higher US tariffs would not make any impact on Nepal. “There are chances of Indian and Bangladesh garment manufacturers entering Nepal to open their factories to benefit from low tariffs for Nepal,” he added. Dahal expects foreign direct investment to come into the country to benefit from low tariffs. “However, since it is uncertain how long the US will maintain such tariffs, it is difficult to be certain about these possibilities for Nepal.”

While the new tariffs offer an opening for Nepal’s exports, the uncertainty over how long the US will maintain these rates makes it difficult to plan investments. Trade experts say Nepal must act quickly to exploit its comparative advantages in the US where it already enjoys preferential US access for 77 products.

Khanal believes Nepal should court garment manufacturers from Bangladesh and India to relocate production to Nepal. “With the US not raising tariffs on Nepal and the MCC compact moving forward, there is a real chance of attracting investment in Nepal and boosting exports,” he added.

The Nepal Stock Exchange (NEPSE) plunged by 28. 44 points to close at 2, 821. 92 points on Monday.

Similarly, the sensitive index dropped by 4. 46 points to close at 485. 69 points.

A total of 25,092,490-unit shares of 324 companies were traded for Rs 10. 21 billion.

Meanwhile, River Falls Power Limited (RFPL) was the top gainer today with its price surging by 9. 99 percent. Likewise, Unnati Sahakarya Laghubitta Bittiya Sanstha Limited (USLB) was the top loser as its price fell by 7. 64 percent.

At the end of the day, the total market capitalization stood at Rs 4. 71 trillion.

The price of gold has dropped by Rs 1, 100 per tola in the domestic market on Monday.

According to the Federation of Nepal Gold and Silver Dealers’ Association, the yellow metal is being traded at Rs 198, 100 per tola today. It was traded at Rs 199, 200 per tola on Sunday.

Similarly, the price of silver has dropped by Rs 15 and is being traded at Rs 2, 315 per tola.

The Karnali government has tightened the budget implementation process for the current fiscal year to ensure greater transparency, accountability, and results. The provincial government has issued 27-point budget implementation guidelines to all 79 local governments in Karnali, covering intergovernmental financial transfers, revenue sharing, project and program implementation, as well as accounting, reporting, and auditing.

According to Ravilal Sharma, Secretary at the Ministry of Economic Affairs and Planning, one-fourth of the financial equalization grant will be released in four installments—in August, October, January, and April. The guidelines allow the provincial government to reduce, withhold, or control transfers depending on the province’s economic situation, revenue status, grants received from the federal government, and the balance of the provincial consolidated fund.

The Ministry of Economic Affairs may request financial and physical progress reports for projects and programs funded through provincial transfers. Local governments that fail to provide the required reports risk having their grants withheld. Conditional, supplementary, and special grants must be used solely for the designated project or program and cannot be diverted elsewhere.

Under the guidelines, 60 percent of revenue from advertisement taxes, tourism fees, and natural resources such as stone, gravel, and sand must be retained by the local government, while the remaining 40 percent must be deposited monthly into the provincial consolidated fund. Failure to do so will result in deductions from the local government’s financial equalization grant. Similarly, the provincial government will transfer 40 percent of vehicle tax revenue to local consolidated funds, in accordance with the National Natural Resources and Finance Commission’s determination.

The guidelines also set conditions for program and project implementation. If a local government wishes to amend a conditional grant-funded project, it must request approval from the provincial government with a clear justification, ensuring that neither the subject area nor the budget changes. Such amendments can be made only until mid-Dec 2025. Furthermore, political party office bearers, elected representatives, their family members, construction entrepreneurs, and civil servants are barred from serving on consumer committees. Projects assigned to consumer committees cannot be implemented—directly or indirectly—through construction entrepreneurs.

All local governments in Karnali must submit income and expenditure reports for fiscal year 2024/25 to the provincial accounting unit in the prescribed format by mid-July. Failure to do so will result in suspension of revenue distribution and grants for the fiscal year. The provincial government has also directed that information boards be installed for every project and program.