RMG exports fear order loss as US buyers 'sit on the fence' over tariff shifts

Highlights:

• US tariff uncertainty stalls new Bangladesh export orders
• Buyers demand 2% price cuts on shipments
• Exporters warn prolonged uncertainty threatens garment sector
• US Supreme Court ruling reshaped Trump tariff measures
• Uniform 15% tariff risks eroding Bangladesh's advantage
• Buying houses absorb costs as retailers resist sharing benefits

Bangladesh's export momentum braces for fresh headwinds as uncertainty over the fate of the United States' short-term 15% tariff—whether it will be extended, increased or withdrawn after five months—has prompted American buyers to pause fresh commitments.

Beyond the freeze in new orders, the tariff—imposed by President Donald Trump after the US Supreme Court scrapped reciprocal tariffs—has triggered renegotiations on existing shipments.

Several US buyers are now demanding 2% price cuts on goods already in the pipeline, following the reduction of the tariff from 20% to 15%. Exporters say the move threatens to further erode already thin margins.

Infograph: TBS

Buyers 'sitting on the fence'

At least eight Bangladeshi exporters told The Business Standard that US clients are "sitting on the fence" amid rapidly shifting trade policies. Seven reported a clear pause in decision-making, warning that order flows will not normalise without long-term policy clarity.

Shovon Islam, managing director of Sparrow Group, said buyers are in observation mode.

"They are deferring decisions until the final tariff structure becomes clear. Without certainty, long-term planning is impossible," he said.

SM Khaled, managing director of Snowtex Group, echoed the concern. "Our current order book is secured until June, but there is deep uncertainty about what happens after the five-month window," he said.

For Khaled, whose annual exports exceed $200 million, the US accounts for 20% of total trade. The present volatility, he added, has created a procurement stalemate, with buyers reluctant to commit beyond immediate needs.

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, described the situation as "unpredictable".

"Buyers are in the dark about where the tariff rates will finally land," he said. According to him, customers are placing only minimum-volume orders, a conservative approach that could severely hurt Bangladesh's garment exports if prolonged.

Policy volatility weighs on trade

Economists say the stop-start nature of US trade policy is amplifying risk.

Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue, pointed to the legal oscillation shaping US tariff measures.

"The Supreme Court struck down the initial reciprocal tariffs, but the administration quickly introduced new ones under different statutes," he noted.

Because President Trump retains the authority to impose targeted or "surgical" tariffs on specific products or countries, Mustafizur warned that buyers are operating in a vacuum of uncertainty—booking orders only when unavoidable.

The US remains Bangladesh's largest apparel market, absorbing around 20% of total garment exports.

Data from the US-based Office of Textiles and Apparel (Otexa) show that US imports from Bangladesh reached $8.18 billion in 2025, accounting for 11% of total US global apparel sourcing.

In April 2025, the Trump administration initially set a 37% reciprocal tariff on Bangladesh, later negotiated down to 20% by August. Exporters now fear that a uniform 15% tariff applied equally to all countries would wipe out Bangladesh's relative advantage.

"The earlier tariff structure gave us a head start over China and India," Khaled said. "We captured orders shifting out of China because of higher costs there. With a flat tariff, that incentive disappears."

Otexa data show that between January and November 2025, Chinese garment exports to the US fell 34%, while Bangladesh's shipments grew 12%, alongside gains by several other major apparel exporters.

A level tariff regime, exporters argue, could reverse that trend by intensifying competition.

Buying houses squeezed as buyers seek discounts

The reduction from 20% to 15% has sparked immediate renegotiation attempts.

The Business Standard has seen an email from a mid-sized US buyer requesting a 2% downward adjustment on already-placed orders that have yet to clear customs.

"Please note due to recent tariff changes, Charles is requiring a 2% adjustment to the DDP cost for any goods that have not cleared customs," the message reads, instructing compliance by close of business Monday (US time).

A senior official at a Dhaka-based buying house, speaking anonymously, said the burden of adjustment would fall on intermediaries.

"We cannot push manufacturers for further discounts. We have to absorb the cuts ourselves," he said. For his firm, which sends 90% of its shipments to the US, the financial exposure is significant.

Other agents said the weekend timing of Washington's tariff shift left them scrambling as the US business week began, anticipating further renegotiation requests.

Mohammad Hatem warned that more buyers are likely to follow suit.

Yet exporters argue that the 5 percentage-point tariff reduction should not be captured entirely by retailers. They say manufacturers had already slashed prices during the higher-tariff period to keep orders flowing and deserve to share in the benefit.

Shovon Islam said his group plans to seek a 1% share of the savings from buyers.

Khaled, however, struck a more sceptical tone. "The buyers are pocketing the entire benefit of the lower rates without offering us any concessions," he said.

For now, Bangladesh's garment sector finds itself caught between policy unpredictability in Washington and pricing pressure from its largest export market—waiting for clarity that may not come soon.