US TARIFF WARS AND GLOBAL TRADE FRAGMENTATION:EMERGING MARKET EXPORT IMPACTS, SUPPLY CHAIN RELOCATION, AND TRADE DIVERSION EFFECTS IN INDIA, VIETNAM, AND BANGLADESH

ABSTRACT

The resurgence of economic nationalism and the strategic deployment of tariffs as instruments of industrial and geopolitical policy by the United States have catalyzed a fundamental restructuring of global trade architecture. US tariff actions — escalating sharply from 2018 through 2025 and extending into 2026 — have disrupted established trade patterns, elevated global average tariff rates unevenly across sectors and trading partners, and introduced a sustained regime of policy volatility that discourages long-term investment and supply chain planning (Amiti et al., 2019; Fajgelbaum et al., 2020). This paper investigates three interconnected dimensions of this transformation: (1) the impact of US tariffs on emerging market export performance, with focus on India, Vietnam, and Bangladesh; (2) the patterns, drivers, and welfare implications of supply chain relocation triggered by tariff policy shifts; and (3) the mechanisms and empirical evidence for tariff escalation and trade diversion effects on key developing economy export sectors. Employing a systematic secondary data review and applied trade economics analytical framework — drawing on gravity model insights, value chain theory, and political economy of trade — the study synthesizes evidence from 2018 to 2025. Key findings indicate that US tariffs on Chinese goods have generated significant trade diversion to Vietnam and, to a lesser extent, India and Bangladesh, particularly in electronics, textiles, and apparel sectors. However, diversion gains are conditional on absorptive capacity, infrastructure quality, and trade policy readiness. Supply chain relocation — the 'China Plus One' and broader 'friend-shoring' phenomena — is structurally transforming investment flows into Southeast and South Asia, yet beneficiary countries face capacity, compliance, and geopolitical complexity risks. Policy volatility itself — independent of actual tariff levels — has demonstrably suppressed investment and export planning in smaller, less diversified economies. The paper contributes to trade fragmentation theory, value chain economics, and development policy, and provides actionable recommendations for affected emerging economies and multilateral institutions.