High US dependence may bring over 250 RMGs to edge as high tariff looms 

Over 250 Bangladeshi garment factories face severe repercussions if the United States proceeds with imposing a 35% additional tariff on imports from the country effective from 1 August.

These factories are particularly vulnerable, as 60% to 100% of their exports are destined for the US market, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Another 1,000 factories are also feared to feel the pressure, although their exposure to the US market is less significant, ranging from 1% to 60%. 

Inamul Haq Khan Bablu, senior vice president of BGMEA and managing director of Ananta Garments Limited, told TBS, "Those exporters who send more than 60% of their total exports to the US market will be most impacted." 

He explained, "Already, due to the increased 10% tariff, most factories exporting to that country have had to bear 2% to 5% of the tariff burden, consequently incurring losses. If another 35% is added, these factories will not be able to survive exporting there in the long term." 

Bablu also noted that "not just exporters, US buyers are also concerned."

The US stands as Bangladesh's largest single export market, accounting for nearly $9 billion worth of goods, of which over $7 billion comprises readymade garments.

Mahmud Hasan Khan Babu, president of BGMEA, informed TBS that approximately 2,500 garment factories affiliated with the organisation currently export apparel to the global market.

According to BGMEA data, 1,322 of its member factories export to the US market. Additionally, some factories from the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), another prominent apparel exporters' body, also export to the US. 

While BKMEA Executive President Fazlee Shamim Ehsan could not provide precise figures, another source indicated that, excluding common members of both associations, around 200 factories export to the US, with roughly 50 of these having over 60% of their exports directed there. Cumulatively, over 300 factories from both organisations are poised to incur substantial losses due to their high dependency on the US market.

'35% tariff pressure could be unbearable'

Ha-Meem Group, one of Bangladesh's largest garment exporters, is heavily reliant on the US market. AK Azad, managing director of the group, shared his concerns at a discussion programme in Dhaka yesterday. 

"Today (Sunday) I received an email from a major buyer asking me to inform them what percentage of the new tariff I, as the supplier, would bear for products made from 1 August, if the additional 35% of tariff comes into effect," Azad said. 

He added, "I export $80 million worth of products to that buyer annually, and my income from it is $1.37 million. If I pay 35% of the tariff from $80 million, how can I possibly bear it?" 

The veteran exporter commented that in his 40 years in the business, he has never witnessed such a crisis in the export sector. "We, the businessmen, have brought this sector to a respectable position. But now we are disappointed." 

Azad conveyed, "Disappointing news is coming from the US. The large brands we export to are monitoring and lobbying on the ongoing tariff negotiations with the US government. They have informed us that it doesn't seem like you (Bangladesh) will get a good result."

A factory owner in Narayanganj's Kanchpur, who requested anonymity, told TBS that 80% of his exports go to the US. "My buyers are coming to Bangladesh to discuss how much of the increased tariff I can absorb," he said. "This is not sustainable. If this continues, I may be forced to shut down the factory."

'Finding alternative markets will not be easy'

BGMEA President Mahmud Hasan Khan Babu underscored the difficulty of finding immediate alternatives: "It is not possible to find alternative markets for such a big market overnight. In that case, exporters might be able to export there for one season somehow. After that, there will be no option but to shut down."

According to BGMEA data, 822 factories export up to 20% of their total volume to the US, amounting to $1.27 billion. Another 176 factories export between 21% and 40%; 87 factories between 41% and 60%; 91 factories between 61% and 80%; 46 factories between 81% and 90%; and 100 factories export between 91% and 100% of their total output to the US.

Meanwhile, a Bangladeshi government delegation is expected to travel to the US today or tomorrow for negotiations on the tariff issue, though no representatives from the private sector or the garment industry owners are included in the team.