Economists question US trade deal gains after new tariff

Infograph: TBS

Despite signing a $3.7 billion aircraft purchase agreement and agreeing to buy higher-priced American wheat as part of its commitments under the US Agreement on Reciprocal Trade, Bangladesh has so far gained little except fresh tariffs imposed unilaterally by Washington, raising questions about the deal's effectiveness.

Bangladesh now faces an additional 10% tariff over alleged forced labour, effective 24 July, while a separate US investigation into alleged excess production could expose the country to further duties. 

Meanwhile, a key benefit promised under the trade deal — zero reciprocal tariff on apparel made with American cotton — remains elusive, leaving Bangladesh's exporters uncertain about any gain from it. 

Bangladesh made all the concessions, while the US imposed only tariffs – that is how economists assess the trade deal after Washington slapped fresh tariffs on Bangladesh.

Rather than accepting economic losses as the cost of global power politics, they argue Dhaka should immediately begin negotiations with the US to revise or even scrap the deal.

Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), told TBS that the trade agreement with the US was "fundamentally unfair and unreasonable".

"The US has imposed almost identical tariff rates on around 60 countries, including Bangladesh. That means Bangladesh gained no real advantage from signing the agreement. Instead, it has committed to importing various US products at higher prices," he said.

Professor MA Razzaque, chairman of Research and Policy Integration for Development (RAPID), described the agreement as "extremely unfair" and "completely unequal".

"This can hardly be called a trade agreement. Normally, both sides make concessions. Here, Bangladesh made all the concessions but received nothing in return," he said.

Garments made of US cotton free from 10% tariff

Officials said the Office of the US Trade Representative (USTR) has informed Bangladesh that garments made with US cotton will face only the existing 15% tariff from September - the new 10% duty will not apply in this regard. 

However, the facility will be available for only three years, with the US retaining the authority to determine the eligibility and the maximum export volume.

Cambodia, Indonesia, and Malaysia have been offered the same arrangement. However, after a US court struck down the reciprocal tariff regime, Malaysia cancelled the trade agreement it had signed with Washington in March.

Trade analysts are sceptical that Bangladesh will be able to take meaningful advantage of the scheme. They say the US is likely to impose conditions so restrictive that Bangladeshi exporters may struggle to qualify for the duty-free facility.

After the interim administration signed the trade agreement just two days before February's election, policymakers hailed the arrangement as a major achievement.

Bangladesh is the world's largest importer of US cotton, buying nearly $4 billion worth annually. In July-April of FY26, the country exported goods worth $7.36 billion to the US.

After a US court invalidated the reciprocal tariff regime, the Trump administration imposed a temporary 10% tariff for six months under separate legislation. 

As that expired on Friday, another 10% tariff imposed under Section 301 of the Trade Act of 1974 over alleged forced labour came into effect.

Among the 60 affected countries, Bangladesh, India, Malaysia, and 14 others face a 10% tariff, while China, Vietnam and 36 other countries face 12.5%. The remaining countries are subject to tariffs ranging between 10% and 12.5%.

The foreign ministry has described Bangladesh's slightly lower tariff rate than China and several other competitors as a positive outcome. 

'Deal should be revised or cancelled'

Economists said Bangladesh is bound by its commitments to purchase US products under the agreement, even if doing so results in financial losses. Instead of accepting those costs, they argue, Dhaka should immediately begin negotiations to revise or terminate the deal.

CPD's Mustafizur Rahman said that if the trade agreement is fully implemented, Bangladesh could face an additional 19% tariff.

"If other countries continue to face tariffs of 10-12%, while Bangladesh is subjected to an extra 19% under the agreement, it will lose its competitive edge. The government should therefore begin negotiations with the US to terminate the agreement," he said.

He added that several studies estimate the 10% tariff alone would increase costs for US buyers by around $100 billion a year, eroding their purchasing power and likely reducing imports from Bangladesh and other exporting countries.

MA Razzaque said the agreement's only apparent benefit for Bangladesh was the promise of duty-free access for garments made with US cotton, but even that remained uncertain.

"The agreement merely states that the US will determine the mechanism for granting the facility. I do not believe Bangladesh will be able to benefit from it," he said.

"The US no longer adheres to trade agreements or international trade rules. It uses its economic power to impose obligations on other countries. As a result, Bangladesh will still have to honour its purchase commitments even if it receives no meaningful concessions from Washington, despite the economic cost," Razzaque added.

Costly commitments

Although Bangladesh has yet to ratify the agreement, it has already begun implementing key commitments, importing energy, consumer goods and other products from the US and US companies at higher prices.

On 1 July, the government approved the import of 2.2 lakh tonnes of US wheat under a government-to-government arrangement at $322 per tonne.

On the same day, it also approved the import of 50,000 tonnes through an international tender at $297.92 per tonne, meaning the government agreed to pay about $24 more per tonne for US wheat.

Following the signing of the trade agreement in February, Dhaka also agreed to purchase 14 Boeing aircraft worth around Tk45,000 crore. The government and private sector have also increased purchases of US LNG, sugar, soybeans, cotton and other commodities.

The interim administration also amended the Public Procurement Act and Public Procurement Rules to make it easier for US companies to participate in public tenders.

Fears over fresh tariffs

Trade experts say the Trump administration launched investigations into 60 countries, including Bangladesh, over alleged forced labour but has never disclosed any evidence supporting the allegations. They argue the tariffs were imposed unilaterally.

They fear the ongoing USTR investigation into Bangladesh's alleged excess production capacity could follow the same pattern and result in additional tariffs.

Experts note that every country investigated under Section 301 over alleged forced labour ultimately faced tariffs, suggesting the outcome had been predetermined.

Mohammad Hafizur Rahman, former director general of the WTO Cell at the commerce ministry, rejected the allegation that Bangladesh has excess production capacity.

"Garments are Bangladesh's principal export, yet almost all raw materials are imported. There is no basis for claiming Bangladesh has excess production capacity," he said.

He said Bangladesh's only real advantage is its low-cost labour. "Employing a large workforce in the garment sector at relatively low wages does not constitute excess capacity; rather, it reflects the economic realities of Bangladesh."

He argued that such allegations would only be credible if Bangladesh were producing goods on a scale unmatched by competitors such as India, China or Myanmar.

Exporters remain unconvinced

BGMEA President Mahmud Hasan Khan said Bangladeshi exporters have yet to receive duty-free access for garments made with US cotton, despite the commitments made under the agreement.

"USTR has informed us that the facility will become effective from September. The US will also determine the eligibility conditions and export volume. The concession will be available for three years," he said.

Fazlee Shamim Ehsan, senior vice-president of BKMEA, said there was little sign that Bangladesh would receive meaningful benefits from Washington.

"The agreement signed during the Yunus administration remains ambiguous. It does not specify what percentage of US cotton must be used in a garment to qualify for duty-free treatment. Ultimately, the extent of the benefit will depend entirely on decisions taken by the Trump administration," he said.