Govt to seek 3-month pause on 37% US tariff

Chief Adviser Muhammad Yunus will write to President Donald Trump today, requesting a three-month suspension of the 37% US reciprocal tariffs as part of measures to shield Bangladesh's exports to its largest single-country market.

The government has planned to introduce duty exemptions to boost imports from the world's number one economy, establish a central warehouse for US cotton, increase fuel imports including LNG on a government-to-government basis, and remove non-tariff barriers.

Meanwhile, the commerce ministry will send a letter to the US Trade Representative (USTR) for the same purposes.

The ministry has prepared a draft and decided to finalise it after a meeting with US embassy officials led by Commercial Counsellor John Fay in Dhaka this morning, with plans to send it to the USTR this evening.

The meeting is expected to discuss ways to remove non-tariff barriers flagged by the US.

The letters will outline a time-bound action plan, including tariff reductions to boost imports from the US, and commit to implementation within three months based on discussions with Washington.

Although the meeting chaired by the chief adviser yesterday announced a reduction in the trade deficit with the US, it was decided that the letter from Bangladesh will focus on increasing imports rather than committing to reduce the trade deficit. 

Policymakers believe that even with increased imports, if Bangladesh's exports grow more, the trade deficit will not decrease, leading to the decision to withdraw the promise to reduce it. 

These decisions were reportedly made at a high-level meeting yesterday, held at the ministries of commerce and finance, along with a meeting with the US Embassy in Dhaka.

The letters will also commit to removing tariff and non-tariff barriers, and addressing obstacles for US businesses in Bangladesh. 

Following the imposition of additional duties on Bangladesh, the government's high-level policymakers began official talks yesterday. Commerce Adviser Sk Bashir Uddin, Industries Adviser Adilur Rahman, CA's High Representative Khalilur Rahman, and Special Envoy for International Affairs Lutfey Siddiqi visited the Gulshan residence of US Charge d'Affaires in Dhaka Tracey Ann Jacobson on Sunday morning.

Following this, the commerce ministry held a ministerial meeting with stakeholders. 

CA's Press Secretary Shafiqul Alam told reporters that the government has decided to amend the Public Procurement Rules to prioritise US companies in contracting work in Bangladesh, and the US Embassy has been notified. 

In a meeting with the US Charge d'Affaires, the advisers outlined the government's efforts to reduce the trade deficit with the US. 

The commerce adviser said, "We have identified the areas where the US has concerns regarding our tariffs and non-tariffs. We will address those that benefit our economy and find solutions through discussions for those that do not."

Commerce Secretary Md Mahbubur Rahman said at a meeting yesterday that the ministry has prepared a draft letter to be sent to the USTR. The action plan includes reducing the trade deficit with the US by lowering tariffs, opening a central warehouse for US cotton within two weeks, and increasing imports by addressing tariff and non-tariff barriers. 

The ministry will also request the US to convene a Ticfa meeting for detailed discussions and inform the US about the government's efforts to ensure labour rights.

The commerce ministry expects the central warehouse facility to increase US cotton exports to Bangladesh by 3-4 times, with the NBR confirming the warehouse will be ready within two weeks.

Following the tariff increase announcement, Bangladesh's Ambassador to the US wrote to the USTR offering discussions, said Khalilur Rahman. He and foreign ministry officials stated they will actively engage with the USTR to ensure a win-win situation by boosting imports from the US. 

The planning adviser emphasised that increasing productivity is key to enhancing competitiveness, and the government will support exporters in their efforts to achieve this. 

He also mentioned that Bangladesh will take necessary steps after analysing the actions of major economies, including China and the European Union, in response to the tariffs imposed by the US and their impact.

What businessmen and economists say

Businessmen shared their views in a meeting chaired by the finance adviser. Afterward, former BTMA president Tapan Chowdhury said, "While I was initially worried after the US tariff announcement, I am no longer concerned after seeing the government's response. The action plan prepared by the government offers good news for businessmen." 

He said, "The US is the world's largest growing market. Therefore, we must ensure that Bangladesh maintains its competitiveness and a level playing field. We also need to explore additional imports from the US."

Former BGMEA president Rubana Haque said, "We hope the letter from Bangladesh will be compelling enough for Donald Trump to read." Former BGMEA president Faruque Hassan told TBS that the government plans to increase imports from the US and ensure that US businesses can operate more easily in Bangladesh.

BKMEA President Mohammad Hatem said "If the central warehouse facility is launched, cotton imports will rise by 3-4 times, boosting US exports to Bangladesh." 

He said RMG currently in the supply chain have the previous price tags. "If the new tariff rate takes effect on 9 April, buyers may reject the consignments. Therefore, postponing the tariff for three months would allow these shipments to be exported," he added.

Economist Mashrur Riaz, MA Razzak, and FBCCI Administrator Md Hafizur Rahman attended the commerce ministry meeting in the morning. 

Mashrur told TBS unilaterally exempting Bangladesh from tariffs would be difficult. He proposed in the meeting that the best approach is to understand what the US wants from Bangladesh and implement it.

MA Razzak suggested that the government keep Bangladesh closely involved in negotiations with the Trump administration. 

Hafizur said he has suggested the commerce ministry to promptly organise a Ticfa meeting to discuss solutions and actions needed to secure relief from the increased US tariffs.

NBR mulls tariff reductions  

A senior NBR official told TBS that Bida has initially sent a list of products for which tariff reduction is being considered. The list includes products that the NBR is considering for reduced tariffs, such as electronic integrated circuits (processors and controllers), medicaments for therapeutic or prophylactic purposes, immunological products, and instruments and appliances used in medical, surgical, or veterinary sciences. 

It also includes parts and accessories of automatic data-processing machines, processing units for such machines, machines and apparatus for manufacturing semiconductor devices or electronic integrated circuits, appliances for pipes, boiler shells, tanks, data-processing machines, spark-ignition reciprocating piston engines, parts of gas turbines, storage units for data-processing machines, and compression-ignition internal combustion piston engines.

The NBR is also considering reducing tariffs on imports of semiconductors, gas turbines, and medical equipment. NBR sources said the highest average tariff, up to 600%, is applied to whiskey, while vehicles are taxed at 212%. However, these products are imported in small quantities. In contrast, cotton, soya beans, liquefied butanes, vessels, and liquefied natural gas are duty-free, despite their high import volumes.

The tariff reductions being considered are not limited to the US but are based on HS codes, meaning tariffs will be lowered for goods imported from any country. However, the official said these reductions won't significantly impact the trade gap with the US. 

To reduce the gap, Bangladesh must increase imports from the US, particularly focusing on zero-duty goods. This will help decrease the weighted average tariff rate, which the US currently calculates as 74%. According to standard calculations, Bangladesh's weighted average tariff rate for US goods is 3.32%.

From June to March this year, Bangladesh imported goods worth Tk25,196 crore from the US, with customs, regulatory, and supplementary duties totalling Tk838 crore, averaging 3.32%.

In FY24, Bangladesh imported $2.2 billion from the US while exporting $8.4 billion, resulting in a trade gap of $6.2 billion. The US has calculated a 74% weighted average tariff based on Bangladesh's imports and imposed a 37% reciprocal tariff.

A senior NBR official, virtually present at the commerce ministry meeting yesterday, said, "We do not want to disclose specific products or rates for tariff reductions, as we must ensure compliance with World Trade Organization (WTO) policies." 

Meanwhile, a Bida meeting on Saturday focused on resolving non-tariff issues quickly. Sources revealed that initiatives have been taken to remove certain non-tariff barriers, such as cancelling the double fumigation requirement for cotton imports, approving separate bonded warehouses for cotton, and prioritising the purchase of US agricultural and technology products. Discussions also included proposing special economic zones for top US companies.