Your Next GAP Hoodie Might Say ‘Made in Nepal’ But Don’t Ask Where It Was Sewn.

Imagine you’re at home, minding your own business, and then out of nowhere, your friend calls: "Emergency! Had a fight with the landlord, can I crash at your place?" And before you know it, your spare room is a chaotic, temporary embassy for a week.

That's basically Nepal right now. Only this time, the “friends” are India and Bangladesh, and the landlord causing all the drama? None other than Donald Trump, swinging his favorite weapon called tariffs.

Last week, he went all out with a 50% tariff on Indian exports. Nepal, meanwhile, still faces just 10%.

Now suddenly,  that makes us look like the cheapest spare room in the neighbourhood. And guess who’s noticing? GAP, Puma, Nike, Zara, the brands that have traditionally been camping in India or Bangladesh, are now asking: “Should we pack our bags and move to Kathmandu?”

For Nepal, though, this is the million-dollar question: Is this our golden ticket, the moment we've been dreaming of, or are we just a convenient crash pad until the tariff storm blows over? 

Because let’s not forget; Soybean and sunflower oil exports look like a miracle on paper, but most of it is just a re-export scheme, not a real industry. What’s to say garments won’t head down the same road: numbers going up, but with nothing sustainable underneath.

It's a gamble, and everyone's holding their breath to see how this plays out.

How Trump’s Tariff Shook The Indian Garment Industry

Let’s break down what happened. Trump decided to punish India for buying “too much Russian oil.” His logic was to cut India’s trade earnings, and Russia would instantly feel the heat. So out came the tariff hammer; 50% on garments, jewellery, footwear, chemicals, furniture, the whole catalogue. Bangladesh got 20%. Even Pakistan (19%) and Vietnam (20%) aren’t escaping this tariff jungle.

Getting back to India, their garment exports to the US are worth about $22 billion a year, positioning it as the fourth largest exporter to the States. Slap 50% duties on those, and you’ve just made Indian exporters the most unpopular kids at the global trade party. Analysts are even saying 25% of India’s textile exports could vanish in the next six months alone.

Meanwhile, Trump is boasting about “standing up to Moscow,” but for Indian exporters, it feels like someone just flipped the table at dinnertime. And Nepal? We’re sitting there holding a plate, wondering if scraps, or maybe a feast, might fall our way.

Why Nepal Suddenly Looks Like a Bargain

On paper, Nepal is now the underdog everyone wants to date. Our exports to the US face just a 10% tariff. Compare that to India’s 50%, and suddenly Kathmandu looks like a discount outlet for global supply chains.

Do the math: if Nepal captures even a small slice of India’s lost orders, garment exports could explode by 700X. That means we could shave a little off our ballooning $1.5 trillion trade deficit.

And like we mentioned before, the big brands are circling as well. GAP, Puma, Nike, Zara, and other global names that already run production in India are now eyeing Nepal for potential opportunities. Indian companies are in the mix too, debating whether to set up new factories here or partner with local ones. Some even want to move fast, like “within six months” fast.

But for Nepal, this isn’t just about filling up order books. It’s also about avoiding being dragged into something dodgy, like turning into a smugglers’ paradise for “Made in Nepal” tags slapped on Indian clothes. (We’ll talk about this in detail)

Current State of Nepal’s Garment Industry

If you rewind the clock to the early 2000s, Nepal’s garment industry was the country’s pride and joy. Back then, readymade garments were our number one foreign currency earner. Exports touched Rs 12 billion a year, and the industry gave jobs to half a million Nepalis. That’s half a million families paying school fees and buying chiura because of stitching jeans and T-shirts.

Then came the perfect storm. In 2005, the global quota regime (MFA/ATC) ended, removing the protection that had limited competition from giants like China and Vietnam. (It hadn’t guaranteed duty-free access; that came later for some items under the US NTPP.) Add the Maoist insurgency and the global slowdown after 9/11, and the industry collapsed almost overnight.

More than 85% of factories shut after the crash (from roughly 1,200 at the peak). A 2019 TEPC study counted 33 GAN-registered factories, while GAN said in 2024 that about 100 were operating; signs of a modest rebound, but far from the old base. Since we’re a landlocked country, transportation costs 25% more expensive than neighbouring countries.

At present, Nepali garment exports are just Rs 8.75 billion; barely 3.2% of national exports. From being the crown jewel, the industry has been reduced to a dusty trinket in Nepal’s trade showcase.

Opportunities on the Table for Nepal

Now, let’s get to the fun part. Trump’s tariffs may have slammed India and Bangladesh, but for Nepal, it’s cracked open a little window that nobody saw coming. And if we’re smart, that window could turn into a door.

• Foreign Direct Investment (FDI): Imagine Indian and Bangladeshi firms bringing in money, machinery, and expertise. That's the capital Nepal desperately needs right now.
  

• Job creation: Garments are labour-intensive. We’re talking tens of thousands of young Nepalis finding work here instead of queueing outside manpower agencies, waiting to head to Qatar or Malaysia.
  

• Export diversification: Right now, our trade basket is embarrassingly fragile. Soybean oil; that we don’t even produce, is doing way too much heavy lifting. Adding garments back in would finally give us a little balance..
  

• Technology transfer: This isn’t just stitching with a sewing machine anymore. Modern factories bring cutting, dyeing, quality control, and these are skills that stick with workers even if investors pack up later. That's the capacity we desperately need.
  

• Global brand access: And of course, the brands themselves. GAP, Puma, Nike, Zara are billion-dollar order pipelines. If Nepal plugs into even one of those streams properly, we’re talking consistent, large-scale business, not just one-off charity orders.

In short, this could be more than a quick rebound. Done right, it’s a chance to rebuild a whole ecosystem. The kind of chance we don’t usually get, and the kind that; if we mess it up, we’ll regret it for another 20 years.

The Elephant in the Room: Transshipment Risks

Whenever there’s quick money on the table, the first instinct in our part of the world is: “How can we shortcut this?” And in this case, that shortcut has “smuggling scandal” written all over it.

Just imagine it. Indian exporters are suddenly stuck with warehouses full of clothes they can’t sell to the US. The border with Nepal is wide open. So what’s the temptation? Just roll the trucks over, slap on a shiny “Made in Nepal” tag, and boom; ship them out at 10% duty instead of 50%.

Sounds clever, right? But it’s also illegal. And the fallout would be nasty:

• We’d lose our preferential tariff advantage overnight.
  

• US customs would blacklist us.
  

• Nepal’s trade reputation would go down the drain.

And the scary part is we’re actually vulnerable to this. Our border with India is open, we don’t really have proper transshipment laws, and let’s be honest, our enforcement record is more about press conferences than results. Just look at the sunflower and soyabean case. 

Sure, the government is talking about forming a joint task force to keep things clean. But with our history, do you really trust that system to hold up when there’s real money involved?

That’s why this is the elephant in the room. The money will look too good to resist, but if we go down that path, we’ll torch the very opportunity that could have revived our industry.

The Boring but Brutal Truth: Structural Limitations

On paper, Nepal sure looks like a bargain, but in reality, we’ve got some heavy baggage that makes this a tough sell.

1. Too Few Factories, Too Little Output

To be honest, Nepal simply doesn’t have enough factories ready for GAP or Nike to come knocking. And the ones we do have, are running far below global standards. At this rate, we might never be able to keep up with the competition.

2. Infrastructure Woes

Electricity blackouts may not be daily headlines anymore, but power supply is still patchy and manufacturing facilities are outdated. Modern garment production needs more than a few sewing machines in a dusty hall.

3. Customs Bottlenecks

Export procedures in Nepal are, let’s just say, not designed for speed. Paperwork piles, approvals take forever, and “fast-track” usually means someone had tea with the right official.

4. Landlocked Logistics

Finally, the big elephant: Nepal is landlocked. Shipping containers to the US means first dragging them across Indian ports. That adds a 25% cost premium and a delivery time of 120 days, compared much shorter delivery times in competing countries. In the fashion industry, where trends change faster than TikTok dances, that delay is a killer.

And that’s the brutal truth. Nepal might look cheap from the outside, but cheap doesn’t mean ready. Unless we fix these cracks, global brands might knock on our door, peek inside, and decide it’s just too messy to move in.

Is There a Way Around It?

Of course there’s a way around, and here’s how we see it. This whole thing looks shiny right now with brands scouting, investors sniffing around, but unless we play it smart, it’ll fizzle out faster than a Kathmandu band’s reunion tour.

First things first, we can’t afford to get caught cheating. If Nepal turns into a shortcut route for Indian stock, game over. The Americans will yank away our tariff perks and we’ll be branded as smugglers. We need a serious anti-transshipment system, like proper checks for quality and how much value has been added in Nepal. We don’t want yet another case of sunflower and soybean oil. 

Second, we’ve got to make it easy for investors to actually set up shop. Right now, FDI in Nepal feels like a scavenger hunt. One office sends you to another, a clerk asks for a document you’ve never heard of, and by the time you’re done, the investor’s already on a flight back to Delhi. We need a clean, simple rulebook. “Here’s what you can invest in, here’s how you register, here’s your timeline.” Boom.

And customs? Don’t even get us started on that. If we can’t fix that, we might as well pack up. Exporters can’t be waiting weeks for one stamp. Everything should be digitized and cleared fast. Otherwise, GAP will just go, “Never mind, let’s stick with Vietnam.”

Now, long term? We’ve got to actually build something, not just borrow hype. Nepal doesn’t need to be a label-slapping hub. We need actual factories, real skills, and real tech. Think about modern stitching, dyeing, proper quality checks, basically stuff that makes brands stick around.

And one more thing: don’t bet everything on America. If we hinge our future on one tariff tantrum in Washington, we’ll get burned again. Diversify. Europe, Japan, even India’s domestic market. Spread it out so one guy in the White House can’t make or break us overnight.

At the end of the day, Nepal doesn’t need investors who come only when the headlines are hot. We need the ones who stay when the hype dies down.

Let’s Wrap it Up

So here’s where we stand. India’s trade minister can beat his chest and say, “We will not bow to US pressure,” but on the ground, their exporters are panicking and orders are drying up. And Nepal? We’re suddenly looking like the lifeboat floating right next door.

But let’s not kid ourselves. This isn’t a forever opportunity. We’ve got limited time before global brands figure out their next moves and the supply chain resets. We need to prove we can deliver, or stumble and watch it all slip away.

And this is where the fork in the road gets real. Nepal can grab the chance; revive an industry, create thousands of jobs, and chip away at our giant trade deficit. 

Or we can trip on our own bad habits; smuggling, red tape, half-baked planning, and blow the whole thing up.

For you in the diaspora, here’s the picture: next winter, when you’re in Sydney or Boston buying a hoodie, that tag could very well say Made in Nepal. The question is, will it be a proud label that signals a revival of Nepali industry, or just another fake sticker slapped on someone else’s clothes?

Nepal has the tariffs, the timing, and yes, the talent. What we need now is the tenacity not to waste it. Because in global trade, second chances don’t knock twice. 

For now, all we can do is wait and watch; only time will reveal whether this becomes a blessing or a curse for Nepal’s exports.