Uncertainty overshadows relief as Trump now raises tariff to 15%
Exporters warn policy uncertainty could dampen long-term gains
Highlights:
- US court scraps tariffs; Trump raises uniform levy
- Bangladesh exporters welcome relief, fear policy instability
- Tariff cut may lower costs, boost demand
- Buyers cautious, shifting to smaller, short-term orders
- Bilateral trade deal uncertain; US may demand concessions
- Experts urge vigilance before US midterm elections
Bangladesh's garment exporters welcomed short-term relief after the US Supreme Court scrapped reciprocal tariffs but uncertainty looms large as President Donald Trump increased the 10% fresh levy he announced immediately after the court ruling to 15%.
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Industry leaders and economists warn that persistent policy uncertainty in their largest export market could dampen longer-term gains.
Until Friday's ruling, Bangladesh faced a 20% reciprocal tariff on exports to the United States, despite signing — but not ratifying — a bilateral trade agreement that envisaged a 19% rate. Following the court's decision, President Donald Trump immediately declared a flat 10% tariff on all countries for 150 days, a measure that will also apply to Bangladesh. But, a day later, he chose to increase it to its highest ceiling of 15% under the relevant trade clause.
If implemented as announced, Bangladesh's competitive position in the US market would revert to levels seen prior to April 2025. Exporters say the reduced rate could lower import costs for American buyers, potentially translating into lower retail prices for apparel and stronger consumer demand.
Yet they caution that frequent shifts in US tariff policy are unsettling importers. Without clarity over future rates, buyers may avoid placing large, long-term orders and instead opt for smaller consignments to minimise risk exposure.
Agreement in limbo
Commerce Secretary Mahbubur Rahman said the bilateral trade agreement signed with Washington could effectively lapse following the court's ruling. However, analysts believe the United States may still press signatory countries to honour commitments made under the deal, including increased imports of US goods such as arms, wheat, liquefied natural gas and aircraft.
According to Trump, the court has curtailed his authority under the International Emergency Economic Powers Act, but other statutory avenues remain open for the administration to pursue trade and tariff measures.
The White House has reportedly requested countries including India, the UK and the European Union — all of which have signed trade arrangements with the US — to adhere to concessions granted to Washington under those agreements, despite the shift to a 15% uniform tariff in place of the previously anticipated reciprocal rates.
Experts urge caution, not complacency
Exporters and economists have urged Bangladesh to avoid complacency and closely monitor developments at least until the US midterm elections in November.
Zahid Hussain, former lead economist at the World Bank's Dhaka office, said Bangladesh's response should be guided by strategy rather than sentiment. He recommended using the 150-day window to identify areas of vulnerability, strengthen compliance with labour and environmental standards, and prepare for potential renegotiations.
Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue, described the development as presenting both opportunities and risks. If the reciprocal tariff framework is invalidated, he said, Bangladesh could seek a review of prior commitments within the agreement's legal provisions — provided exit clauses and notification requirements permit it.
However, he cautioned that the US could still impose uniform tariffs, new non-tariff barriers, quotas or export restrictions. "A sudden withdrawal from the entire agreement could be strategically hazardous," he said, calling for a comprehensive review of existing commitments and preparation for alternative trade restrictions.
Former WTO Cell Director General Md Hafizur Rahman and RAPID Chairman Mohammad Abdur Razzaque said Bangladesh may face pressure to implement pledges on increased imports of US goods, even though the agreement has not been ratified and is not legally binding.
Industry reaction: relief tempered by risk
Bangladesh Garment Manufacturers and Exporters Association President Mahmudul Hasan Babu described the shift as a "lesser of two evils", noting that lower tariffs typically reduce prices and stimulate consumption.
However, he acknowledged that persistent tariff fluctuations are creating uncertainty. "Retailers will not leave shelves empty, but they are likely to import in smaller volumes. Overall exports could actually decline."
Ha-Meem Group Managing Director AK Azad said the 15% levy would not significantly affect Bangladesh, as it is substantially lower than the previous rate.
However, Azad predicted fresh legal challenges in the US against the new tariff regime, suggesting such measures could conflict with global trade rules.
Echoing similar concerns, Anwar-ul Alam Chowdhury, president of the Bangladesh Chamber of Industries, stressed that the situation remains temporary and unpredictable.
Economist Selim Raihan, professor at the University of Dhaka, said predictability is nearly as important as tariff levels for Bangladesh's garment sector.
"I would not expect a sharp spike in orders immediately, as US buyers typically plan months in advance," he said. While the court ruling may ease legal uncertainty and improve sentiment, he warned that further restrictive trade measures from Washington could disrupt the global trading system and continue to cast a shadow over Bangladesh's export outlook.
