20% US tariff may hit buyers' capacity, warn exporters
"Since our rates are normal compared to other countries and lower than India’s and even lower than China’s for now, this could have a positive impact on our exports in the long term,” Shovon Islam, managing director of Sparrow Group said
Bangladesh apparel exporters fear that the recent US tariff on Bangladeshi goods will reduce the buying capacity of American buyers and dampen consumer demand, even though the rate has been lowered to 20% from the initially proposed 35%.
"This is good news for us because our tariff rate is now almost equal to, or in some cases slightly lower than, that of competitor countries. Overall, it's a relief," BGMEA President Mahmud Hasan Khan Babu told The Business Standard.
However, he warned, "Since US buyers will now have to pay 20% more duty than before, their buying capacity and local consumers' consumption will decrease."
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"Initially, our exports will take a hit, and we will face some price pressure. But in the long run, Bangladesh will overcome this challenge as rates are now relatively normal compared to rival countries," he added.
Shovon Islam, managing director of Sparrow Group, whose exports to the US account for over 50% of its total shipments, echoed similar concerns.
"The 20% tariff rate is a big relief compared to what we feared," Shovon said.
"However, as tariffs will increase the price of apparel in the US market, their purchasing power will decline, which means our exports will initially suffer. But since our rates are normal compared to other countries and lower than India's and even lower than China's for now, this could have a positive impact on our exports in the long term," he added.
On 2 April, US President Donald Trump announced higher tariffs on several countries, citing trade deficit concerns. At that time, Bangladesh was subject to a 37% tariff.
Later, on 9 April, Washington suspended the tariffs for three months, giving countries an opportunity to negotiate with the US on the matter.
The three-month deadline ended on 9 July.
The day before, President Trump wrote to Bangladesh's interim government chief adviser, Professor Muhammad Yunus, informing him that the tariff for Bangladesh had been reduced to 35% from 37%. However, the tariffs were not enforced immediately after 9 July.
Countries were given until 31 July to reach trade agreements with the US to lower the tariff rates.
Later, yesterday (31 July), the White House announced a reduction of the tariff to 20%, after the final round of the talks took place between a Bangladesh delegation and US officials in the US capital.
