The United States has announced tariffs of up to 245 percent on Chinese goods, sparking global concerns that Chinese products diverted from the US market could flood other countries. In Nepal, there are worries that domestic products—particularly footwear and ready-made garments—could face pressure from the influx of cheaper Chinese alternatives.

The US President's Office confirmed that the new tariffs will not apply to smartphones and laptops. In retaliation, China has imposed a 125 percent tariff on American goods. With both countries raising trade barriers, trade between the world's two largest economies has come to a near standstill.

According to US government data, the US imported $440 billion worth of goods from China in 2024, while China imported $145 billion worth from the US.

Economists warn that Chinese exporters will now seek alternative markets to absorb the surplus goods originally intended for the US.

“There is no doubt that some of those goods will make their way to Nepal,” said trade expert Ravi Sainju, a former joint secretary at the Ministry of Industry, Commerce and Supplies.

“Even though Nepal is a small market, an influx of cheap Chinese goods could affect domestic industries producing similar items,” Sainju added. “China is not just eyeing Nepal, but also India and Bangladesh as alternative destinations.”

Despite this, other experts say the impact on Nepal will be limited, since most Chinese imports are not directly competing with Nepali-made goods.

“The bigger concern is for products from other countries that currently have a foothold in Nepal’s market,” said Paras Kharel, Executive Director of the trade think tank South Asia Watch on Trade, Economics and Environment (SAWTEE). “But for Nepal’s local producers, particularly in footwear and garments, there could be some pressure.”

Vidushi Rana, Executive Director of Kiran Shoes Manufacturers Pvt. Ltd., the maker of Goldstar brand shoes, said the impact is already being felt. “Cheap Chinese shoes are undercutting our prices,” she said. “If the government ensures that importers pay the same taxes we do, we can still compete.”

Experts warn that if foreign goods continue entering Nepal at prices below domestic production costs, local industries could suffer or even collapse. “When cheap imports dominate the market, domestic manufacturers might shift to importing rather than producing,” Kharel noted. “There’s also a risk that Chinese goods could be smuggled into Nepal and re-exported to the US disguised as Nepali products.”

Such practices would violate Nepal’s trade agreement with India, which prohibits the re-export of third-country goods without significant value addition. Violations could invite pressure from India.

India is also facing similar concerns. Fearing a surge in Chinese imports, Indian manufacturers have urged their government to intervene and take preventive measures.