90-day pause of US tariff brings relief for RMG owners

Highlights:

• US pauses 37% tariff on Bangladeshi garments for 90 days
• Relief expressed by Bangladeshi garment industry leaders over tariff suspension
• New flat 10% tariff plus existing 16% will apply
• Nobel Laureate Yunus influenced Trump's decision with a personal request
• Bangladesh could benefit from diverted US orders, Chinese investment

The 90-day suspension of the reciprocal tariff imposed by the US on Bangladeshi products is providing significant relief to the country's apparel sector, according to industry leaders and economists.

They have welcomed this decision, seeing it as a stabilising factor for exports amid rapidly changing global trade dynamics, but underscored the necessity to carefully strategise Bangladesh's next move.

Shovon Islam, managing director of Sparrow Group, said, "The three-month suspension of the Trump tariff policy brings some relief. A flat 10% tariff will now apply, along with our existing 16% rate, but the additional 37% has been lifted – for now."

Md Abul Kalam, managing director of Chaity Group, also expressed optimism, calling it good news for Bangladesh and the global apparel industry. 

He credited Chief Adviser Muhammad Yunus for influencing the decision, noting that Yunus had written directly to US President Donald Trump, requesting a deferment of the steep tariff.

Mohiuddin Rubel, former BGMEA director, highlighted the potential for Bangladesh to capture a larger share of redirected US orders that were previously fulfilled by China.

"In 2024, China exported $16.5 billion worth of clothing to the US. With the new 125% tariff on Chinese exports, Bangladesh could emerge as a more attractive sourcing option," he said.

Debating the speculation that the 125% tariff imposed on Chinese products could create opportunities for Bangladesh, Dr Selim Raihan, a professor at the Department of Economics, University of Dhaka, said that given the short time frame and the unpredictable nature of the global market, such prospects are unlikely to materialise within this limited period.

He, however, agreed the three-month suspension of US tariffs on Bangladeshi exports presents an important window of opportunity for the country.

"This temporary pause opens the door for Bangladesh to pursue focused diplomatic and trade negotiation engagement with the United States. In the short term, the suspension provides some relief to exporters by reducing the likelihood of order cancellations or deferrals. It also allows both the public and private sectors to undertake necessary preparations for any future tariff-related challenges," the economist wrote in a Facebook post.

Expressing concern, he added that the retention of the 10% baseline tariff poses a risk of reduced domestic demand in the US market for Bangladeshi products, as higher prices could dampen consumer interest, particularly in price-sensitive segments.

Selim Raihan warned that ongoing global market volatility, compounded by policy uncertainty in key economies, may further weaken buyer confidence and disrupt supply chains. 

"These factors together could negatively impact Bangladesh's export performance in the US," added the professor, who is also the executive director at the South Asian Network on Economic Modeling (Sanem).

Emphasising the need for Bangladesh to adopt a series of strategic measures, he wrote: "It is crucial to step up lobbying efforts in Washington by coordinating the activities of the Bangladesh Embassy, diplomatic missions, and expatriate business leaders to strengthen the country's voice."

"Looking further ahead, there must be a concerted push toward diversifying the export basket and expanding into new markets beyond the United States and other traditional destinations, with a particular focus on Asian economies," the economist continued.

The professor also suggested several other preparatory steps to deal with the changes.

First, the government should establish a high-level task force bringing together relevant stakeholders, including policymakers, exporters, industry associations, researchers, and diplomats, to develop and implement a practical, time-bound strategy for upcoming trade negotiations.

Second, it is equally important to build a structured framework for bilateral dialogue with the US, grounded in the priorities identified by the USTR—such as tariff liberalisation, reduction of non-tariff barriers, and institutional reforms. This also presents an opportunity to reform Bangladesh's own tariff regime, which remains burdened by high customs duties and para-tariffs.

Third, institutional strengthening is another key priority. Agencies responsible for customs, quality control, market access, and product safety must enhance their capacity to meet international standards and facilitate smoother trade processes. 

Finally, the country must prepare for a worst-case scenario by developing contingency plans that include targeting alternative markets and promoting new product lines, to reduce over-reliance on a single market or sector.

"This is a pivotal moment that demands strategic vision, inclusive coordination, and timely action," Dr Selim Raihan concluded.

Talking to The Business Standard, Commerce Adviser SK Bashir Uddin said in this regard, "We appreciate the US government's initiative to suspend the 37% tariff for three months. Our Chief Advisor, Professor Muhammad Yunus, already welcomed this move. 

"It is not just about bilateral trade with Bangladesh; it has also created an opportunity to ease global trade tensions to some extent. Moreover, it has generated a positive reflection in the international stock markets."

He further said, "Our counterpart is the USTR. Our embassy in the USA and the Ministry of Commerce are connected with them. We are trying to identify areas for boosting trade with the USA by strengthening our economic foundation. We are working on strategies and ways to enhance trade."