Navigating the 20% US tariff: Ex-BGMEA leader Salam weighs in on Bangladesh's RMG strategy

In FY2024–25, Bangladesh exported goods worth $8.76 billion to the United States. More than 80% of Bangladesh's exports to the US are apparel.

In this context, how does the additional 20% tariff on Bangladeshi products impact the RMG sector?

In an interview with The Business Standard, MA Salam, managing director of Asian & Daf Group and the first vice president of BGMEA, addressed this question and many more.

The interview was conducted by TBS Chattogram Bureau Staff Correspondent Jobaer Chowdhury.

 How much relief will the reduction in additional tariff bring for Bangladesh's apparel sector?

In a word, we have been freed from a suffocating situation. Undoubtedly, this is also an opportunity for us.

Our apparel industry is heavily dependent on the US market, and the sector is a key contributor to the national economy.

Now that the tariff rate has been reduced, Bangladesh will be able to compete again.

Major apparel-exporting countries such as Sri Lanka, Vietnam, Pakistan, and Indonesia – Bangladesh's key competitors – now face tariff rates of about 19–20%, nearly the same as Bangladesh. How competitive is Bangladesh in this scenario?

Our competitors' tariff rates are close to ours, so Bangladesh will remain competitive.

The US took these steps mainly to counter China. Bangladesh can still hold its ground in the apparel market.

Research institutes in the US have forecast that these additional tariffs will drive inflation there. How much of a challenge will that pose for Bangladesh?

Ultimately, the burden of extra tariffs falls on consumers. This will cause inflation, and people's purchasing power will shrink—that's normal. Our buyer companies may also limit their investments. Sometimes they try to shift the burden of extra costs onto us (the producers), although good buyers don't do that.

I expect that while orders may fall in the first year or two, they will return to normal later. During the Covid-19 pandemic, the US government took effective measures to contain inflation, and they worked.

Moreover, Bangladesh mainly sells low-priced products. The impact of additional tariffs on a $10 item and a $50 item is very different. Low-priced products will suffer less.

Amid these new tariffs, port tariffs have also been raised in Bangladesh, while there are still utility shortages in gas and electricity. What challenges does this create?

For those of us engaged in import and export, the port is our partner. If we do business, the port earns freight charges. If we don't, the port also loses. I believe now was not the right time to raise port tariffs. The port is not running at a loss. To keep Bangladesh's exports going, this decision should be reconsidered.

In addition, we must ensure electricity, gas, and other utilities to keep businesses running and production uninterrupted. Our factories are facing these challenges too.

The US is set to impose a 40% tariff on transshipment goods. How will this affect Bangladesh?

Bangladesh doesn't import much from other countries only to relabel and re-export. So this will not affect us. Vietnam, however, imports from China and re-exports to the US. They will be affected.

What are the future challenges for the apparel sector, and what steps are needed?

The big challenge ahead is the graduation from Least Developed Country (LDC) status. Bangladesh is set to begin the graduation process in 2026, to be completed by 2028. After that, we will no longer enjoy duty-free access to European markets. 

This will put the apparel sector under pressure. The government must start working on this issue now. We must begin discussions immediately on whether we want to graduate or not. Otherwise, we will face another serious blow.

Since labour costs are rising, we also need to reduce dependence on manual work and increase mechanisation to raise efficiency. Forward linkage industries must also be developed.

You graduated in the US in 1985 and started your garment business in the 1990s. Tell us about your company.

I set up my first factory in 1992. Currently, we have 14 factories exporting apparel worth $300–350 million annually. About 90% goes to the US, while the remaining 10% goes to Europe. Our factories produce garments, children's clothes, men's items, pants, and shirts. We are also trying to expand into the European market.