US buyers push Bangladeshi exporters to partly absorb tariff costs
Since August, when the US imposed a 20% reciprocal tariff on Bangladeshi apparel, some buyers have sought to transfer between 5% and 7% of the added cost onto suppliers, while others want them to carry the full burden
Highlights:
- US imposes 20% reciprocal tariff on Bangladeshi apparel
- Buyers push suppliers to absorb part of tariff costs
- Some factories accept losses; others risk losing US orders
- Industry groups urge fair price negotiations with US buyers
- Bangladesh's apparel exports to US rise 22% despite tariffs
- Competitive edge fades as cost-sharing pressures undercut tariff advantage
Exporters in Bangladesh had hoped for a competitive boost when the United States set its reciprocal tariff on Bangladeshi goods slightly below rates imposed on some rivals. But that edge appears to be slipping away, as US buyers increasingly pressure suppliers to absorb part of the higher duty.
Since August, when the US imposed a 20% reciprocal tariff on Bangladeshi apparel, some buyers have sought to transfer between 5% and 7% of the added cost onto suppliers, while others want them to carry the full burden.
Keep updated, follow The Business Standard's Google news channel
Those who comply can secure orders, while those who resist are left with contracts hanging in limbo, several industry representatives told The Business Standard.
Shovon Islam, managing director of Sparrow Group, said US buyers have asked his company to bear one-quarter of the new tariff, particularly for spring, summer, and fall collections.
"Out of necessity, we confirmed those orders," he said. "Buyers have made it clear they will now set prices themselves."
Sparrow, which produces about 40 million pieces of garment annually, half for the US, is absorbing about 5 percentage points of the tariff. A garment that previously sold for $100 now costs $120 in the US, but the factory captures only part of that increase.
Rakibul Alam Chowdhury, managing director of Chattogram-based HKC Apparels, said he has refused to shoulder the added cost, leaving many orders unconfirmed.
"Our profits are minimal, sometimes at break-even," said Rakibul, whose factory employs 6,500 workers and ships more than 90% of its products to the US. "We cannot take loss-making orders. If necessary, we may reduce factory size, but further losses are unsustainable."
"They expect us to manage it. I can't take on this pressure, so orders are not being confirmed," he added.
Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), confirmed that some buyers have pressed suppliers to share the burden, while others have stood firm.
"One company in the association negotiated and agreed to cover a portion," he said.
Abdullah Hil Nakib of Team Group, for instance, said his company's buyers are accepting the higher prices without pushing for discounts.
Buyers admit shifting part of cost
Some buyer representatives acknowledge asking for partial cost-sharing. A country director of a major US brand said, "Many retailers are bearing more than half of the increased tariff, but margins are very slim. Suppliers are being asked to bear between 1% and 3%. The rest will eventually fall on US consumers."
A senior officer at a Dhaka buying house told TBS that nearly all their buyers are from the US. "They have agreed to bear half of the new tariff and asked us to manage the other half. We ourselves are absorbing some pressure, while requesting other suppliers, such as fabric, yarn, and accessories providers, to take on some of the price pressure. Otherwise, securing orders would be difficult," he said.
Major buyers including Walmart and two Gap Inc subsidiaries did not respond to requests for comment.
Associations push back
Inamul Haq Khan Bablu, senior vice president of BGMEA, said factories are producing garments at very low profit or break-even. Under these conditions, price negotiation should adjust for the new tariff.
He added that weak negotiation capacity among some factory owners gives buyers an advantage, and offering discounts risks misleading buyers about garment owners' profits.
Mohammad Hatem of BKMEA added, "We have instructed our members to calculate the new tariff and conduct price negotiations accordingly."
Tariff dynamics
The US first announced a 35% additional tariff on Bangladeshi goods in April to address its trade deficit, before temporarily applying a 10% duty on all countries during talks. Following negotiations, Bangladesh's final reciprocal tariff was set at 20% in August, compared to 25% on India (later raised to 50%), 20% on Vietnam, 19% on Pakistan, and higher rates on China.
The rate is lower than some competitors, but exporters say the expected surge in orders from countries facing steeper tariffs has yet to materialise.
Bangladeshi garments previously entered the US market at around 16.5% duty. With the new 20% reciprocal tariff, the effective rate now stands at 36.5%.
According to US Department of Commerce data, apparel imports reached $45.8 billion between January and July, up 5% year-on-year. Imports from China dropped 21%, while Bangladesh's shipments rose 22% to $4.92 billion.
Bangladesh ranks among the US's top apparel suppliers alongside Vietnam, China, India, Indonesia, and Cambodia. Leading buyers include Walmart, VF Corporation, Levi Strauss, Target, Fruit of the Loom, Gap Inc., Tapestry, and PVH.
