35% US tariff: Bangladesh’s $10b garment trade teeters on edge

Bangladesh's export-dependent economy, driven primarily by its readymade garments (RMG) industry, is facing an unprecedented wave of uncertainty. 

The recent reimposition of a 35% retaliatory tariff by the United States on Bangladeshi goods has placed the country's $10 billion bilateral trade with the US in serious jeopardy.

Although government-level discussions between the two nations are ongoing, a number of American buyers have already suspended their orders, with several actively exploring alternative sourcing destinations.

This development comes at a time when Bangladesh was consolidating its position as a reliable apparel supplier in global markets. In 2024 alone, Bangladesh exported garments worth $7.4 billion to the US. The industry had shown remarkable resilience — recovering from the Covid-19 pandemic and adapting to rapidly shifting global demand. 

The effects of this tariff are already being felt on the ground. With no significant diplomatic breakthrough reported, orders have begun to decline or be cancelled outright. Several exporters have started scaling back their commitments to the US market. 

All indicators point towards a major setback in exports for the upcoming summer season — a crucial period for knitwear shipments. A drop in summer orders threatens to disrupt factory operations and put thousands of jobs at risk. 

Industry projections suggest Bangladesh may lose up to 25% of its total orders for the Summer and Autumn/Winter 2026–27 seasons. 

Meanwhile, countries such as Jordan, Egypt, Kenya, and Ethiopia are emerging as increasingly attractive alternatives for US buyers, benefiting from significantly lower or negligible tariffs compared to Bangladesh. 

While these countries do face infrastructural constraints, history suggests that once investment begins, production relocates swiftly — as was previously seen when manufacturing shifted from China and Sri Lanka to Bangladesh.

The present uncertainty goes far beyond the risk of lost orders in a single market — it threatens the very foundation of Bangladesh's economic growth. Many exporters, responding to growing global demand, had been expanding their production capacity. These investments are now under threat. If tariff relief is not achieved, the fallout could extend well beyond lost revenues to suppressed wages, rising unemployment, and broader social instability.

The effectiveness of the government's diplomatic efforts has come under increasing scrutiny from industry leaders. In the absence of tangible progress, buyer confidence is rapidly eroding. Several global brands are now pressuring Bangladeshi exporters to absorb a portion of the newly imposed tariffs, further compressing already narrow profit margins. In some cases, this has resulted in financial losses and delayed payments. 

Although discussions with the US are expected to continue until 1 August, immediate and strategic intervention is essential. Industry leaders have, reportedly, failed to effectively communicate the urgency of the situation to the government. 

Despite repeated efforts, they have been unable to secure an appointment with the Chief Adviser. At such a critical juncture, the sector is calling for decisive leadership and robust government action.

Moreover, the industry has yet to mobilise support from US-based cotton producers — stakeholders who could have potentially strengthened Bangladesh's case for tariff relief. There is an urgent need for the government to intensify its diplomatic efforts, leveraging trade data, geopolitical context, and the history of bilateral cooperation to make a strong case for the withdrawal of the tariffs.

Bangladesh's RMG sector now stands at a defining crossroads. Without swift, effective measures, the country risks not only losing future orders but also forfeiting the hard-won reputation and market share that it has built over decades in the global apparel arena.

In this context, an urgent visit to the US by Chief Adviser Muhammad Yunus is being viewed as essential. With his international standing and influential networks, Yunus may be well placed to negotiate a favourable outcome for Bangladesh with US policymakers.

Simultaneously, the country must prioritise market diversification, infrastructural development, and enhanced regional connectivity to open up new avenues for export. To enable this shift, the government must ensure reliable energy supplies and improved efficiency in port and customs services. Without such reforms, the industry will inevitably suffer, and the country may face a profound economic crisis.

The writer is the former vice-president of BGMEA.