The United States has imposed new tariffs on Bangladeshi export products, which is a concerning signal for the country’s leading export sector, the ready-made garment industry.
According to the new tariff structure, the tariff on Bangladeshi products in the US has been increased from 15% to 37%. This will raise the price of Bangladeshi garments for American buyers and make competition in the US market more challenging.
The US is one of the largest markets for Bangladesh’s ready-made garments. Every year, Bangladesh exports approximately $8.4 billion worth of garments to the US, accounting for a significant share of total exports. A decline in exports to the US could have a major impact on Bangladesh’s overall export earnings.
Economists and industry leaders warn that the new tariffs on Bangladesh’s major export products could negatively affect export revenue. The ready-made garment sector, which constitutes the core of Bangladesh’s exports, may suffer significant losses due to the tariff increase. Higher tariffs will make Bangladeshi garments more expensive for American buyers, weakening Bangladesh’s competitive position in the market. As a result, buyers may turn to alternative suppliers, leading to a decline in export orders.
Impact on Competing Countries
However, industry experts note that competitor countries will not necessarily benefit directly from this move. The new US tariff policy will affect multiple countries globally. India, for instance, is in a relatively favorable position as its tariff rate is 10% lower than Bangladesh’s. This may give Indian exporters a competitive advantage.
Need for Negotiation to Reduce Tariffs
In this situation, former BGMEA director Mohiuddin Rubel emphasizes the need for Bangladesh to engage in immediate negotiations. He suggests that diplomatic discussions with the US could create opportunities to reduce tariffs. Additionally, he proposes that Bangladesh consider imposing retaliatory tariffs on US imports, which could strengthen its position in negotiations.
Importance of Export Market Diversification
Mohiuddin Rubel further highlights that Bangladesh should learn an important lesson from this tariff increase—over-reliance on a single market is risky. Instead of depending solely on the US market, Bangladesh should explore new export destinations and diversify its markets for long-term sustainability.
Experts argue that Bangladesh must take swift diplomatic and trade-related measures in response to the new US tariff policy to minimize its adverse effects on exports.
Tariff Imposition on Competitor Countries
Among Bangladesh’s competitors, China, Vietnam, India, and Indonesia have also faced high tariffs under the new US policy:
China: 34%
Vietnam: 46%
India: 30%
Indonesia: 35%
As a result, Bangladesh’s tariff increase is somewhat lower compared to these countries, which could provide a slight advantage. However, the overall global supply chain has been disrupted, prompting many businesses to reconsider their supply strategies.
Experts point out that, while Bangladesh’s tariff increase is lower than that of its competitors, the higher costs might still push US buyers to seek alternative sources, negatively impacting Bangladesh’s exports.
Possible Consequences of the New Tariff Structure
Economists warn that once the new tariff structure takes effect, export costs will rise, potentially weakening Bangladesh’s competitive position in the global market.
Professor Selim Raihan, Executive Director of the South Asian Network on Economic Modeling (SANEM), states, “This is a major turning point for global trade. The Trump administration’s decision will have a significant impact on the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). The ‘Most Favored Nation’ (MFN) principle, which ensured equal opportunities for different countries, is now being questioned. The US is setting separate tariff rates for specific countries and products, making global trade more uncertain.”
Negative Impact on Bangladesh’s Export Revenue
Economists believe this tariff hike could significantly reduce Bangladesh’s export earnings. Since the US is a key market for Bangladesh’s garments, the new tariffs may lead to a substantial decline in exports.
Key concerns include:
Higher Export Costs: Increased tariffs will raise export expenses, making Bangladeshi products more expensive in the competitive market. Buyers might shift to cheaper sources.
Loss of Competitiveness: Compared to countries like Vietnam, China, Indonesia, and India, Bangladeshi products will become costlier, prompting buyers to look for alternatives.
Risk of Declining Exports: Higher tariffs will make importing garments from Bangladesh less attractive for US buyers, leading to reduced export earnings.
Negative Impact on Investment: The uncertainty created by tariff increases may discourage new investments in the garment sector, affecting industry expansion and employment.
Dollar Shortage: A drop in exports will reduce foreign currency inflows, negatively impacting Bangladesh’s economic stability.
What if GSP Benefits Were Still Available?
The US revoked Bangladesh’s Generalized System of Preferences (GSP) benefits in 2013, citing labor safety and working condition issues. Although the ready-made garment sector was never covered under GSP, other products such as leather goods, handicrafts, plastic products, and home textiles were eligible for the benefits.
If GSP benefits were still in place:
The new tariffs wouldn’t have affected some export products.
Bangladesh could have had an easier time negotiating with the US on trade issues.
The country could have remained more competitive against other GSP beneficiary nations.
What Should the Government Do?
Bangladesh has long been trying to regain its GSP status, but this alone will not significantly benefit the garment industry. Instead, pursuing a bilateral Free Trade Agreement (FTA) or GSP Plus status with the US could be a more effective strategy. Improving labor standards, working conditions, and labor laws is also essential to restoring US confidence in Bangladesh’s trade policies.
To address this situation, Bangladesh should:
Strengthen diplomatic efforts with the US to negotiate a reduction in tariffs.
Work towards regaining GSP or securing a trade agreement with the US
Explore new export markets to reduce dependence on a single country.
Lower domestic production costs to maintain competitiveness.
Enhance product quality to retain buyers.
Analysts believe that Bangladesh must take swift diplomatic action to mitigate the impact of this crisis. Engaging with the US administration to reinstate GSP benefits is crucial. Additionally, diversifying export markets, reducing production costs, and improving product quality will be vital to sustaining Bangladesh’s position in global trade.
Bangladesh’s Key Exports to the US
Bangladesh’s top five export products to the US include:
Non-Knit Men’s Suits – Export value in 2023: $1.9 billion
Non-Knit Women’s Suits – Export value in 2023: $1.09 billion
Non-Knit Men’s Shirts – Export value in 2023: $705 million
Knitwear – Accounts for 30% of Bangladesh’s total exports, a significant portion of which goes to the US
Miscellaneous Textile Products – Various textile products exported to the US
Among these, ready-made garments and textile products dominate Bangladesh’s exports to the US
In the ongoing global trade conflict, Bangladesh’s strategic decisions will determine how well it can maintain its competitiveness in the US market.
