The World Bank has sounded the alarm: South Asia’s growth is set to cool from 6.4% to 5.8% in 2026 after President Donald Trump ramped up US import tariffs. India faces a 50% tariff, with Bangladesh and Sri Lanka each hit with 20% tariffs—moves designed to punish trade with Russia and ongoing trade surpluses but with much wider fallout.

This wave of tariffs hits South Asia’s export-driven economies directly where it hurts—raising costs, cutting demand, and sending shockwaves down supply chains that multinationals depend on. While US policymakers frame this as job protection, the true impact is new price pressures for American businesses and consumers, while South Asian manufacturers are forced to scramble for alternate markets and upgrade their industries.

India remains the region’s heavyweight and will still be the world’s fastest-growing large economy, thanks to its huge domestic market and digital transformation. Still, the tariffs are already hurting Indian auto, electronics, and pharmaceuticals—all reliant on global networks. Forecasts now peg India’s growth at 6.3% rather than the previously expected 6.5%. Finance Minister Nirmala Sitharaman insists India can absorb the shock, but any slowdown in India inevitably ripples throughout South Asia.

Bangladesh, a poster child for export-led growth, now faces a threat to its US market. Unless it diversifies—into electronics, pharmaceuticals, leather goods—it risks losing out. Tariffs raise import costs and stoke inflation.

Sri Lanka’s recovery since its 2022 debt crisis is now at further risk. The US tariffs mean higher import costs and shrinking export revenue, worsening an already fragile fiscal balance.

Trump’s trade nationalism is rewriting the rules for South Asia, leaving smaller economies caught between great power rivalries and the fracturing of globalization. Only by investing in higher-value industries and diversifying export markets can these economies hope to weather the storm.