M A Hossain,
The World Bank’s latest forecast carries a tone of restrained alarm. South Asia — a region that once symbolized post-pandemic economic resilience — may soon find its momentum halted.
The Bank now projects South Asia’s growth to slow from 6.4% to 5.8% in 2026, attributing the dip primarily to a surge in US tariffs and the cascading effects of Washington’s revived trade nationalism under President Donald Trump.
The numbers tell a story of friction, but the deeper narrative is about power and vulnerability in an age of geopolitical egoism. The very global economy that South Asia helped fuel with low-cost labor and nimble manufacturing is now turning on it.
The US has imposed sweeping tariffs on South Asia — 50% on most Indian imports, 20% on Bangladeshi goods, and 20% on Sri Lankan exports. The justification is variously to punish nations for trading with Russia or for running persistent surpluses with the US.
Yet, as with so many blunt instruments in economic diplomacy, these measures hit the innocent harder than the intended targets.
The US’s protectionist tactics are not the first time the country has tried to take advantage. The Smoot-Hawley Tariff Act of 1930 raised tariffs on over 20,000 imported goods in the name of protecting American jobs and punishing unfair traders.
The result was catastrophic: global trade collapsed by nearly 70% within two years, worsening the Great Depression and fueling political extremism worldwide.
Today’s economy is more complex and interlinked. Historically, trade barriers rarely have succeeded in achieving their goals; rather, they invited retaliation, distorted supply chains and created uncertainty.
But Trump’s tariff war is happening at a time when the world is polarized by the Ukraine war, US-China rivalry and growing mistrust in multilateral institutions like the World Trade Organization (WTO).
India’s balancing act
Among South Asian economies, India remains the most resilient. The World Bank expects it to retain its title as the world’s fastest-growing major economy — a tribute to its large domestic market, youthful demographics, strong consumption and digital transformation. Yet the shine is fading at the edges.
Washington’s tariffs on Indian imports threaten to undermine New Delhi’s carefully balanced economic strategy. Automobiles, electronics and pharmaceuticals — all key growth engines — rely on global supply chains that tariffs disrupt. Consequently, India’s growth forecast for 2026–27 has been downgraded from 6.5% to 6.3%.
Finance Minister Nirmala Sitharaman expects that India has the capacity to absorb shocks. Definitely, she has the right to sound confident, but it is also undeniable that resilience has its limits.
Even a small dent in India’s expansion can ripple across the wider subcontinent. As India accounts for over 75% of South Asia’s GDP, its slowdown can choke trade demand and reduce investment flows to its smaller neighbors.
Bangladesh’s economy has been a global success story — growing faster than many of its peers through a mix of remittances, female labor participation and export dynamism.
But that model now faces strain. The US tariffs are threatening its biggest export market. Dhaka needs to accelerate diversification of its higher-value manufacturing — electronics, pharmaceuticals and leather goods.
According to the World Bank, Bangladesh may lose its competitive market unless it improves and modernizes its logistics and supply chain. The tariffs will raise import costs and subsequently will cause inflationary pressures.
Sri Lanka is facing even more uncertainty. The nation is struggling to revive from its 2022 financial meltdown, but in this situation, Colombo now faces the double burden of higher import costs and shrinking export margins.
The government’s fragile fiscal balance — reliant on IMF support and a recovering tourism sector — could easily be upset by declining trade revenues. For a nation still haunted by shortages and protests, tariffs imposed thousands of miles away feel like the aftershocks of an earthquake it never caused.
A broader malaise
Protectionism is just one part of today’s global economic crisis. The World Bank has warned that the world is on the brink of a series of complex crises, which are looming in a vicious cycle of global recession, political instability and rampant inflation.
Rising prices for essential goods like fuel and food are crushing the poor and widening inequality. At the same time, labor markets are becoming increasingly fragmented and crowded, which makes for more economic turmoil.
For ordinary South Asians, these macroeconomic shifts have paved the way for higher food prices, fewer job opportunities and less purchasing power. The region’s celebrated demographic dividend — its young, ambitious workforce — could become a demographic liability if growth falters.
In a sense, the crisis is moral as well as economic. The world’s wealthiest nation, built on the premise of free enterprise, is choosing self-interest over shared prosperity. The tariffs may secure a few thousand manufacturing jobs in the American Midwest, but they threaten millions in Dhaka, Colombo and Chennai.
South Asia’s policymakers and business communities must work to avoid dependence on a single export market, even if it is the US. Diversification must now be considered existential. Strengthening intra-regional trade, deepening ties with East Asia, Africa and the Middle East, and investing in domestic value chains will be vital.
Bangladesh’s possible entry into the Regional Comprehensive Economic Partnership (RCEP), India’s renewed courtship of ASEAN and Sri Lanka’s cautious bid to rejoin China’s Belt and Road orbit together signal an incipient regional recalibration.
These moves are not merely about trade or diplomacy; they are acts of strategic self-preservation. In an increasingly polarized global economy, countries must move together to challenge Washington’s dominance.
At the same time, the US must consider the geopolitical cost of its protectionism. By alienating its fastest-growing partners, Washington is creating an opportunity for Beijing to spread its influence across Asia.
This becomes evident when Beijing offers tariff relief and new lines of credit to affected economies. It is not only a strategic gesture by China, but also an act of smart diplomacy.
Globalization’s fraught future
The World Bank’s warning is not merely a set of numbers but a cautionary tale about the fragility of globalization. For decades, South Asia’s success has rested on the belief that openness pays — that free trade, efficiency and innovation would lift all boats. That belief now stands challenged.
If Washington continues to weaponize tariffs, 2026 may mark not just a slowdown in South Asian growth but the symbolic end of an era — the point at which developing nations realize that global markets, like global politics, are governed not by fairness but by force.
History may yet judge this moment as the juncture when America’s inward turn gave others the chance to lead. For South Asia, survival will depend on adaptability — and the courage to chart a course through a world where economic walls are rising faster than bridges are being built.
M A Hossain, senior journalist and international affairs analyst based in Bangladesh. He can be reached at writetomahossain@gmail.com
This article published at :
1. Asia Times, HK : 09 October, 25
2. The South Asian Times, USA : 10 Oct, 25
