Learning from Vietnam & Bangladesh: Global Lessons for Indian MSMEs in Trade Wars

The recent tariff conflict between India and the United States has once again brought global trade dynamics into the spotlight. With higher duties threatening Indian exports, especially those from MSMEs in sectors like textiles, gems, and engineering, the question arises: how can India’s small businesses stay resilient? To answer this, it helps to look at how Vietnam and Bangladesh—two of India’s closest competitors—have managed to grow despite facing their own trade challenges in the past.

Vietnam, Bangladesh, and India share certain similarities. All three are heavily reliant on labour-intensive industries such as garments, footwear, and textiles. MSMEs form the backbone of these sectors and provide millions of jobs. Over the past two decades, Vietnam and Bangladesh have built strong trade relations with the U.S. and the European Union, while India’s engagement has been more diversified across multiple geographies but often slower to consolidate specific advantages. Vietnam’s entry into comprehensive trade agreements and its free trade deal with the EU gave its exporters tariff-free access to key markets. Bangladesh, on the other hand, leveraged its “Least Developed Country” status to enjoy preferential duty-free access in the EU under the Everything But Arms scheme, allowing its garment sector to scale globally at low cost.

When we compare their strengths, Vietnam stands out for its ability to move quickly and secure strategic trade partnerships. It used the U.S.–China trade war to attract new buyers and build credibility as a reliable alternative supplier. Bangladesh, while less diversified, focused strongly on garments, creating large clusters and cost efficiencies. In contrast, India’s MSMEs are diverse and innovative, but they face higher costs of logistics, slower digital adoption in trade processes, and weaker integration into global value chains.

The reasons behind these differences are not accidental. Vietnam had a proactive trade policy that prioritized bilateral and multilateral free trade agreements, while Bangladesh benefited from concessional treatment under global trade rules. Both countries also invested in cluster-based production, supply chain efficiency, and compliance with global quality standards. India, despite its scale and talent, often struggled with complex regulations, slower infrastructure upgrades, and delayed FTA negotiations, which meant MSMEs could not fully exploit global demand when opportunities arose.

India now has the opportunity to leverage its vast industrial base while integrating key learnings from Vietnam and Bangladesh. The country should prioritize concluding the India–EU FTA, which would grant tariff-free access to European markets, alongside reducing logistics costs through upgraded infrastructure. MSME clusters should be encouraged to adopt sustainability measures and global certifications, enhancing competitiveness under evolving trade norms. Diversifying export destinations—leveraging the recently signed India–UK FTA—can also help mitigate risks, and a stronger focus on energy-efficiency in production will further shield MSMEs from future trade disruptions.

In conclusion, the experience of Vietnam and Bangladesh shows that even smaller economies can thrive during trade wars if they prepare well and act decisively. For Indian MSMEs, the current tariff challenge should be seen not just as a crisis but as a turning point. With sharper policies and stronger support systems, India’s entrepreneurs can convert today’s pressure into tomorrow’s opportunity.