Trump tariffs: A silver lining for Bangladesh RMG?

Infographic: TBS

The Trump administration's tariff hikes on imports from China and Mexico are expected to create opportunities for Bangladeshi apparel exporters, according to industry insiders.

They said for a long time, US imports from Bangladesh and China had been subject to similar duties. But the Trump administration has imposed an additional 20% duty on top of the existing tariffs on Chinese exports to the US in phases, which took effect this month.

Meanwhile, under the new US tariff regulations, a 25% duty has also been imposed on imports from Mexico. Previously, Mexican exports benefited from zero duty under the North American Free Trade Agreement.

The US president later suspended the tariffs, but the exemptions are set to expire on 2 April, when Trump has threatened to impose a global regime of reciprocal tariffs on all US trading partners.

According to a study by the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), Bangladeshi apparel exports to the US market are subject to a minimum duty of 11.7% and a maximum of 32%, depending on the product category.

Business leaders said the duty hike would put pressure on US buyers to diversify their sourcing destinations as alternatives to China and Mexico. In this regard, Bangladesh could be a viable option.

However, economists warn that Bangladesh also has a trade surplus with the US, which may pose a risk for the country when Trump's reciprocal tariffs take effect on 2 April. They advise initiating measures to liberalise trade by reducing local industry protectionism.

Speaking with The Business Standard, Giant Group Director SM Majedur Rahim said the additional duty imposed on US imports from China might push US buyers to shift to other countries.

However, he said this transition would not happen overnight as changing sourcing destinations could take six to seven months.

He added that the group has been doing business with US buyers for a long time, and over the years, their business has seen good growth in the US market despite high duties.

The company's business with US firms is valued at nearly $40 million. Last year, the group achieved export revenues of $75 million.

The company experienced growth of over 23% that year, driven in part by additional orders from US buyers.

"Last year was an exceptional business year for the company," he added, expressing optimism that they expect 10% growth this year.

Economist M Masrur Reaz said the US administration has imposed additional duties on some countries, considering the trade gap between them.

"The US is the largest export market for Bangladesh, but the trade surplus with the US puts us at risk," he added.

New analysis finds Bangladesh's potential

In the US, cotton jerseys and pullovers are in high demand as they cater to both seasonal fashion trends and everyday comfort.

An analysis by "Fashion to Fibre", an online news portal, examined the impact of tariff hikes and shifting trade dynamics among competing countries in the US market. It also explored which countries are poised to benefit from China's potential market loss as higher tariffs make its products less competitive.

Bangladesh is poised to be the biggest beneficiary in this shifting trade landscape, boasting the highest Revealed Comparative Advantage (RCA) of 27.36 and the lowest Unit Value Realisation (UVR) at $14.86/kg.

This indicates that Bangladesh has a strong specialisation in cotton jersey and pullover exports, allowing it to produce and sell at significantly lower prices than most competitors.

With its competitive pricing strategy, Bangladesh primarily faces competition from China, which is set to be impacted by additional tariffs. As a result, Bangladesh is likely to gain further market share as global buyers seek cost-effective sourcing alternatives.

What do business leaders say?

Faruque Hassan, former president of the Bangladesh Garment Manufacturers and Exporters Association, said Bangladeshi apparel exporters are performing well in the US market.

He was optimistic that the coming months would be even better, as some orders are shifting from China to Bangladesh due to the additional duties imposed by the Trump administration.

He also mentioned that China has imposed a 15% duty on US cotton imports.

"This duty measure will benefit Bangladeshi spinning and textile millers, allowing them to buy cotton at a more competitive price," he said.

Faruque Hassan emphasised that to capitalise on this opportunity, the government must address four key issues: ensuring an uninterrupted supply of gas and electricity, reducing costs, improving customs services, and strengthening law and order.

He added that attracting new investment and securing additional orders for Bangladesh depends on maintaining law and order, which remains a top priority. The government should take steps to stabilise the situation, he urged.

Echoing Faruque's comments, Abdullah Hil Rakib, managing director of Team Group, agreed that Bangladesh has an opportunity to expand its presence in the US market as businesses shift from China.

However, he criticised the lack of government support, saying, "The government has shown no intention of aligning policies with the industry's needs."

Meanwhile, BKMEA President Mohammad Hatem said while orders have increased over the past few months, exporters continue to struggle with pricing challenges due to rising production costs.

According to OTEXA data, in 2024, Bangladesh remained the third-largest apparel exporter to the US market, with exports worth $7.34 billion, while China and Vietnam occupied the first and second positions, with exports of $16.51 billion and $14.98 billion, respectively.