Trump’s tariff threatens $40b Bangladesh apparel industry
RMG leaders say tariff devastating blow for Bangladesh’s $10b US market, competitors to gain
Bangladesh's growing trade surplus with the United States – once considered a sign of economic strength – has now become a burden. In an unprecedented move, US President Donald Trump has imposed a staggering 37% tariff on Bangladeshi goods, the second highest among all South Asian nations and the 15th highest in the world.
For India and Pakistan, both emerging leaders in garment exports with significant cotton production facilities, the tariffs stand at only 26% and 29%, respectively. This discrepancy gives them an immediate competitive edge of nearly 10% over Bangladesh.
The numbers tell a grim story. A Bangladeshi-made shirt that once entered the US market with a 16% tariff – bringing its final price to $11.60 from a base price of $10 – will now cost over $15 after the addition of the extra 37% tax. That is a significant jump, one that might compel US consumers to rethink their purchasing decisions.
Industry experts are voicing concerns. "It is very likely that Bangladesh's exports to the US will be negatively affected, as demand may decline," said Prof Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), in an interview with TBS.
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The impact, however, extends far beyond garment manufacturers, who have created four million jobs in Bangladesh. The ripple effects are expected to hit a much wider network that includes textile suppliers, banks, insurance companies, shipping lines, and the entire ecosystem supporting the country's $40 billion apparel industry.
Zahid Hussain, former lead economist at the World Bank's Dhaka Office, is convinced that the United States' new tariff policy will severely damage Bangladesh's export sector as American demand shrinks. His concern runs even deeper: with tariffs pushing up prices across the board, a slowdown in the US economy appears inevitable. "As a result, there is a risk of a decline in exports from Bangladesh," he told TBS.
The shockwaves extend beyond Bangladesh. Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem) and an economics professor at the University of Dhaka, sees this as a turning point in global trade. He warns that the Trump administration's tariff war signals a departure from the long-standing Most Favoured Nation (MFN) principle under the World Trade Organization (WTO) framework.
What exporters say
For exporters, the figures are daunting. MA Jabbar, managing director of DBL Group – an apparel giant that shipped over $450 million worth of garments in 2024 – explained, "We currently pay 15-16% in tariffs to access the US market. A 37% tax hike will be a big blow."
Shovon Islam, managing director of Sparrow Group, stated that Bangladesh's ready-made garment (RMG) industry will be seriously impacted by the latest tariff increase, describing it as "a bolt from the blue" for the sector. He pointed out that Bangladesh is now among the countries facing some of the highest tariffs, noting that after this increase, Bangladesh's export tariff rate will be nearly equivalent to that of China's cotton products.
Some countries may benefit from the change, as their tariff rates remain lower than those imposed on Bangladesh. "Also, Jordan, Egypt, and Kenya may emerge as alternative sourcing countries, as buyers are already shifting to these regions," Shovon added. Referring to his production facilities in Jordan, he explained that while his company is currently producing man-made fiber products there, he has received requests from buyers to manufacture cotton-based products instead, since Jordan's tariff rate on cotton products is only 20%, making it a more attractive option.
The fallout, however, will not stop at ready-made garments. Shams Mahmud, managing director of Shasha Denims Ltd. and a former president of the Dhaka Chamber of Commerce and Industry (DCCI), warned that the much-anticipated relocation of industries from China to Bangladesh – once seen as a significant growth opportunity – now faces considerable uncertainty. He cautioned that even Bangladesh's smooth graduation from least developed country (LDC) status in 2026 could be jeopardized.
Is there a silver lining?
Amid the storm, a glimmer of hope exists. Some of Bangladesh's biggest rivals – China, Vietnam, and Cambodia – are facing even steeper tariff hikes in the US market. Vietnamese and Cambodian exports are being taxed at 46% and 49%, respectively, which makes Bangladeshi products relatively cheaper in comparison. "We are in a better position compared to Vietnam and Cambodia," noted Jabbar, hinting at an opportunity for Bangladesh to retain some market share despite these headwinds.
Dip in exports, possible global economic slowdown: How Bangladeshi economists view Trump's tariffs
M Mohiuddin Chowdhury, a member of the BGMEA's interim committee and director of Clifton Fashion, predicted that the new 37% tariff imposed by the US will lead to immediate setbacks in Bangladesh's garment industry, including the loss of current work orders. However, he also expressed optimism about a new window of opportunity. "There is a significant opportunity for duty-free trade with the US, and it can usher in a new era for us," he said. Mohiuddin further explained that because Bangladesh's imports from the US are not substantial, establishing a duty-free trade relationship could be a game-changer – provided that diplomatic efforts and engagements are successful.
He revealed that the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has already raised the issue with Chief Adviser Muhammad Yunus, and a plan is currently in development.
What Bangladesh must do
As Bangladesh reels from the shock of these steep US tariffs, economists and exporters are urging immediate action. They call for urgent negotiations with US officials, the reduction of tariffs on imports from the US, and leveraging the fact that Bangladeshi manufacturers rely heavily on American cotton. "We do not have the luxury to waste any time. We should immediately begin negotiations with the US," stressed MA Jabbar of DBL Group.
The impact extends beyond garments. Other export sectors – such as ceramic tableware, one of Bangladesh's fastest-growing exports to the US – are expected to suffer as well. With tariffs looming, Bangladesh must act quickly to safeguard its foothold in the US market, argued Shovon Islam, who also suggested that Bangladesh could offer zero-duty access for US agricultural products.
In addition to immediate measures, the long-term challenge is formidable. Bangladesh must focus on boosting productivity, reducing business costs, and expanding regional markets as core strategies to cushion against future trade shocks.
Playing the cotton card
Prof Mustafizur Rahman of CPD highlighted a crucial bargaining chip: Bangladesh is the fifth-largest buyer of US cotton, importing it tariff-free. "The US has already indicated special benefits for countries that use American commodities in their exports," he explained. He also pointed out that Bangladesh imports US scrap metal at zero tariff, another leverage point that could be used in negotiations. "Bangladesh should raise these issues in bilateral discussions and in the Trade and Investment Cooperation Forum Agreement (Ticfa) meeting," Prof Rahman suggested.
A united front for survival
However, bilateral negotiations alone will not be sufficient. Zahid Hussain warned that Bangladeshi exporters must avoid undercutting each other in a desperate race to secure orders. "No single seller should absorb the extra tariff just to stay competitive. Instead, the cost must be passed on to buyers – just as competing countries like Vietnam and Cambodia are likely to do," he advised. For this strategy to succeed, the BGMEA and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) need to enforce a unified pricing strategy to prevent a downward spiral in prices.
