India has withdrawn a key transit facility that allowed Bangladesh to move export cargo through Indian territory to third countries. The decision, announced in Circular No. 13/2025-Customs on April 8, comes shortly after US President Donald Trump's reciprocal tariffs announcement on April 2.

The cancellation effectively ends a route that allowed Bangladesh to trade with Bhutan, Nepal and Myanmar. The transit system had provided Bangladesh with a quick and low-cost method to export goods to neighboring countries for years. Though cargo already in transit will be allowed to complete its journey, the facility itself has been terminated with immediate effect.

Ajay Srivastava from the Global Trade Research Initiative (GTRI) called the development "geopolitically significant." He noted that while India has supported Bangladesh's trade through duty-free market access, this step shows that economic support cannot be separated from security concerns.

The transit facility suspension occurs as India braces for major economic challenges from US trade policies. A recent Emkay Global report projects India could lose up to $6 billion in exports under proposed 10% US tariffs, with potential losses growing to $31 billion if rates reach 25%.

The decision may be linked to Bangladesh's collaboration with China at the Lalmonirhat air base, located near India's Siliguri Corridor. This narrow stretch, known as the "Chicken's Neck," is India's critical gateway to its northeastern states. Reports of Bangladesh exploring strategic cooperation with China in this region have raised concerns in New Delhi.

The impact will extend beyond Bangladesh to affect several countries:

• Bhutan and Nepal, both landlocked nations dependent on Indian territory for trade access
• Myanmar, a key destination for Bangladeshi exports via India
• Regional trade chains that relied on this established corridor

"This could lead to higher costs and delays for Bangladeshi exporters and importers," Srivastava said. The situation may also raise questions about India's compliance with WTO commitments on transit for landlocked countries under Article V of GATT 1994 and the Trade Facilitation Agreement.

The timing adds further complexity, coming just after President Trump's plan to impose a 26% tariff on all Indian exports to the United States. Dr. Dattesh Parulekar of Goa University suggests India's decision might be part of a broader shift in its external trade approach that puts strategic interests ahead of multilateral trade principles.