Nepal’s choices amid competing US and Chinese interests

In this archival interview, a regional policy consultant discusses the likely implications of the second Trump administration’s policies for Nepal and South Asia. The conversation considers foreign assistance, immigration, trade, multilateral institutions and Nepal’s diplomatic balancing.

How might a second Trump presidency influence US strategic interests in South Asia, particularly regarding China’s regional influence?

Trump’s second term created frustration, confusion and curiosity across the Global South, especially in South Asia. Trump and his team campaigned on putting “America First”, including a reassessment of foreign assistance and whether those funds should instead support priorities within the United States.

USAID had long been a cornerstone of US foreign policy, representing commitments to humanitarian assistance, economic development and global stability. Plans announced in early 2025 to substantially reshape the agency raised questions about American assistance and influence. Such a shift could create opportunities for rival nations to make strategic investments in international development.

In South Asia, China’s proximity and the expansion of the Belt and Road Initiative, or BRI, were likely to remain concerns for Washington. The United States could seek closer ties with India, building on defence cooperation and discussions around infrastructure and intelligence sharing.

The United States could also seek to curb Chinese influence elsewhere in South Asia. Nepal, Bangladesh, Sri Lanka, the Maldives and Bhutan receive different forms of technical or development assistance from China and could face pressure to reduce their dependence. Relations with Pakistan would be more complicated because of its close economic and military relationship with China. Washington might also increase engagement with India and other partners while trying to influence Nepal’s approach to the BRI.

How might immigration and H-1B visa policies affect India, Nepal and Bangladesh?

India accounts for a large share of H-1B visa recipients, while Nepal’s share is much smaller. Many Indian recipients work in information technology, while applicants from Nepal and Bangladesh are spread across science, technology, engineering, mathematics and health care.

People awaiting work permits and permanent residency could face longer processing and stronger vetting. Country-cap concerns for certain visa categories would affect India more than Nepal. Students seeking H-1B sponsorship might consider alternatives in Australia, Canada or the United Kingdom. Changes to the Diversity Visa programme would also matter to prospective migrants from Nepal and Bangladesh, while tougher rules could affect family-sponsored applications across South Asia.

Could an “America First” approach affect US foreign aid and development assistance?

The policy shift had already affected assistance routed through USAID in early 2025. An executive order on reevaluating and realigning United States foreign aid called for a 90-day pause on new commitments and spending while programmes were reviewed. Legal challenges and the role of US courts meant the final extent of the changes remained uncertain.

USAID had supported programmes in Nepal, Bangladesh and Sri Lanka involving democracy, governance, health, education, agriculture, food security, water, sanitation, energy, the environment and humanitarian assistance. Afghanistan and Pakistan had also received significant support. India, as the region’s largest economy, was less dependent on such aid but could still be affected in health, energy and technology.

Financing routed through mechanisms such as the Millennium Challenge Corporation, the State Department and other US agencies could continue through different approaches because geopolitical priorities remained important to the administration.

What could US scepticism toward multilateral agreements mean for South Asia?

Tariff proposals announced in early 2025 raised the prospect of wider trade friction. Developing countries receive differential treatment under World Trade Organization rules, but reciprocal tariff proposals and new duties on selected imports suggested a more confrontational trade policy with potential consequences for South Asian economies.

The US withdrawal from the Paris Agreement also raised concerns about climate financing for vulnerable countries such as Nepal, Bangladesh and the Maldives. Reductions in support for international agencies and climate programmes could have long-term consequences for countries relying on external financing and technical assistance in health, education and emergency response.

How might tariffs affect Nepal’s exports, including garments and handicrafts?

Trade between Nepal and the United States includes Nepali exports such as carpets, pashmina, handicrafts, animal food and felt goods, alongside US exports such as medical products, soybeans and coal briquettes. The balance changes from year to year.

A reciprocal tariff policy or stricter labour-compliance requirements could make Nepali goods less competitive in the US market. Nepal’s relatively small export volume limits its bargaining power. Higher tariffs on Chinese products might create narrow openings for other suppliers, but turning those opportunities into sustained gains would require substantial work.

Could Nepal secure stronger US engagement in investment, MCC implementation and geopolitical balancing?

Nepal receives Millennium Challenge Corporation funds intended for transport, energy and economic infrastructure. The compact was signed during Trump’s first term in 2017, suggesting broad familiarity with its strategy, although payments were affected by the wider 90-day review announced in early 2025.

A preference for bilateral and private-sector investment could create opportunities if Nepal offers clear and stable policies in hydropower, tourism and infrastructure. Yet investment decisions and strategic support can carry political expectations.

Nepal has traditionally pursued non-alignment while maintaining relationships with the United States, China and India. Pressure to step back from China’s Belt and Road Initiative would create diplomatic challenges because Nepal has important economic ties with both China and India.

Closer involvement with US regional frameworks might offer economic or security cooperation, but it could also come with conditions. Nepal previously declined participation in the State Partnership Program. Any stronger US engagement would therefore require careful balancing to avoid unwanted political pressure while preserving constructive relationships across the region.