More apparel orders, investments beckon, but gas crisis still a major obstacle

Infograph: TBS

Highlights:

• US tariffs on China shift apparel sourcing to Bangladesh
• American buyers increasingly visiting Bangladeshi factories in person
• Bangladesh faces severe gas and electricity shortages limiting production
• Chinese firms eye Bangladesh for relocating textile investments
• Future US tariffs on Bangladesh remain uncertain and risky
• Infrastructure and energy upgrades needed to attract sustained investment

When the Trump administration reimposed tariffs on Chinese goods after returning to power in January this year, few foresaw the ripple effects reaching the garment hubs of Savar, Ashulia, Gazipur, and Chattogram. But in the interconnected world of global trade, one country's barrier often becomes another's opportunity.

Now, American apparel buyers – once deeply rooted in China's manufacturing zones – are quietly redrawing their sourcing maps. In search of reliable and cost-effective alternatives, many are increasingly turning their attention to Bangladesh.

Exporters say this pivot is no coincidence. With its entrenched role in the global apparel market, Bangladesh now stands as the world's second-largest exporter of ready-made garments.

But the story lies not just in the statistics – it's in the behaviour of buyers. Where sourcing decisions were once made in boardrooms in Hong Kong or hotel suites in Dubai, purchasing managers are now flying to Dhaka. They want to see the factories, meet local partners, and inspect materials firsthand – signalling a renewed willingness to place trust in Bangladesh.

Buyers exploring situation

Buyers are initiating exploratory discussions as they consider shifting orders from tariff-burdened China. At the same time, Chinese investors – especially those in textiles and garments – are also eyeing Bangladesh as a relocation destination amid intensifying US-China tensions.

Yet, this moment of opportunity comes with a significant hurdle: energy insecurity. As demand rises, the supply of gas and electricity is failing to keep pace, raising alarm among entrepreneurs and experts alike.

Industry insiders say gas-dependent factories are receiving only a third of their required supply. Without improvements, attracting new investments, particularly in energy-intensive sectors, will be difficult.

Meanwhile, American buyers are watching Bangladesh's trade relations closely. A 90-day pause in new US tariffs on Bangladesh is nearing its end, and the uncertainty around future tariff decisions remains a concern.

While nations like Vietnam, Cambodia, and Indonesia have begun formal negotiations with the US, Bangladeshi exporters report that buyers are inquiring about the government's diplomatic steps on the issue.

Last week, US apparel giant Gap Inc initiated talks with a Chattogram-based exporter about expanding orders. In 2024, 45% of that exporter's total shipments went to the US.

Speaking to The Business Standard on condition of anonymity, a company high official said, "That buyer is looking to shift some production from China and has begun initial discussions with us."

Abdullah Hil Rakib, managing director of TEAM Group and former vice-president of BGMEA, echoed this trend. "Last week, two US buyers – who usually source from China – came to visit us in Bangladesh. They're looking to expand orders here. This is a good sign," he said. TEAM Group currently sends about 20% of its exports to the US.

TBS spoke with 10 major exporters, four of whom confirmed an uptick in inquiries from American buyers – many of whom already source from Bangladesh but are now considering diverting a portion of their China-bound orders.

Industry leaders agree: the shift away from China appears inevitable, and Bangladesh stands to benefit – if it can resolve critical bottlenecks in energy and infrastructure.

In early April, the Trump administration imposed additional tariffs on multiple countries, including Bangladesh. While Chinese apparel goods were hit hardest with a 145% hike, Bangladesh's tariffs temporarily jumped from 15% to 52%. Later, the increase was scaled back to 10% for all countries except China.

This development dealt a blow to China, the top apparel exporter to the US. Experts believe prolonged tariffs on China could position Bangladesh to gain market share.

Dr Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development (RAPID), told TBS, "While the future of US tariffs is unpredictable, the US-China trade conflict is likely to persist due to geopolitical dynamics. That will push buyers to seek alternatives – and Bangladesh is well-placed."

Asked why not India, Pakistan, or Vietnam, he explained, "China has significant investments in Cambodia and Vietnam. Perception issues may make US buyers cautious there. India also has large-scale investments. For apparel, Bangladesh is the stronger alternative."

China eyes Bangladesh for investment

Facing steep US tariffs, Chinese textile and garment companies are looking abroad to retain their competitive edge – Bangladesh is one of their prime considerations.

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told TBS, "In the past two weeks, three Chinese and one Japanese investor have approached me about setting up operations in Bangladesh."

Md Khorshed Alam, chairman of Little Star Spinning Mills Ltd and former president of the Bangladesh China Chamber of Commerce and Industry, said three Chinese firms have made inquiries – one focused on textiles.

Later this month, a high-level Chinese trade delegation is scheduled to visit Bangladesh to evaluate investment potential.

Energy crisis casts a shadow

But industry leaders are warning potential investors of the country's energy crunch. Khorshed Alam said textile mills are running at just 30-40% capacity due to gas shortages. He is advising Chinese firms to lease existing factories or pursue joint ventures rather than build new ones.

For instance, his own factories – Intimate Textiles Mills in Narayanganj and Little Star Spinning Mills in Ashulia – are operating under severe gas constraints. At 1 PM yesterday, gas pressure at Intimate Textiles Mills was just 0.5 PSI – far below the approved 10 PSI. The shortfall persisted for 48 hours.

Power outages compound the problem. Yesterday morning alone, two rounds of load-shedding totalling 50 minutes were reported between 7am and 10am.

The Ashulia factory fared slightly better with 1.5 PSI pressure, but out of five production lines, only two could partially function. The factory alternates operations to run at just 30% capacity.

NZ Textile Mills Ltd, a spinning and dyeing plant in Narayanganj, also faces worsening energy constraints. On Monday, they endured 5.5 hours of load-shedding, while gas pressure averaged just 1 PSI.

Managing Director Saleudh Zaman Khan Jitu said, "We're operating at half capacity using gas, REB electricity, and costly diesel. We've had to start buying LPG to keep dyeing operations running. We can't even take on new orders now."

Jitu confirmed interest from Chinese investors and said, "If the government ensures energy supply, we can take on more orders and attract more investment. Full capacity could mean $17 billion in additional exports."

Dr Razzaque echoed the warning: "Without energy security, we can't remain competitive. Bangladesh ranks among the lowest in per capita energy consumption globally. Our export performance exceeds our energy capability – this imbalance is not sustainable."

"Infrastructure and logistics also need urgent upgrades to support increased business and investment," he added.

However, there is cautious optimism. At a virtual meeting yesterday, BIDA Executive Chairman Chowdhury Ashik Mahmud Bin Harun said the energy situation could improve within three to six months.

Trade Adviser Sk Bashir Uddin noted that once LNG infrastructure and related systems are fully developed, industries could access affordable, high-quality fuel within two years.

"Any potential investors can come and immediately get natural gas," Bashir stated.