US will reimpose 37% tariff if Bangladesh signs any deal with China, Russia: Experts
They said this condition will also make it difficult for Bangladesh to join the world's largest trade bloc
Experts have warned that Bangladesh's newly signed reciprocal tariff agreement with the United States sharply limits its ability to enter trade deals with countries such as China or Russia.
They said the pact includes a clause barring Bangladesh from concluding agreements with any "non-market economy", with violations risking the reimposition of a 37% reciprocal tariff first imposed by Washington in April last year.
The agreement states: "If Bangladesh enters into a new bilateral free trade agreement or preferential economic agreement with a non-market country that undermines this Agreement, the United States may, if consultations fail, terminate this Agreement and reimpose the applicable reciprocal tariff rate."
The US-classified non-market economies include China, Russia, Vietnam, Belarus, Tajikistan, Uzbekistan, Moldova and Azerbaijan.
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Trade analysts said the clause could also block Bangladesh's entry into the world's largest trade bloc, the Regional Comprehensive Economic Partnership, as China is a member and accession would require separate agreements with all members.
They added that Bangladesh's current trajectory of engagement with China may no longer be viable.
Former WTO Cell director Md Hafizur Rahman and former Bangladesh Trade and Tariff Commission member Mostafa Abid Khan shared these views with TBS while analysing the agreement.
Commerce Adviser Sk Bashir Uddin and US Trade Representative Jamieson Greer signed the deal in Washington on 9 February. Under the pact, the reciprocal tariff on Bangladeshi exports has been lowered to 19%, while garments made from US cotton and synthetic fibres will qualify for zero reciprocal duty.
However, much of the 32-page text released by the Office of the US Trade Representative sets out obligations Bangladesh must meet to access limited tariff relief, they said.
A close reading shows that while most US tariffs remain intact, Bangladesh has agreed to eliminate or sharply reduce customs duties on most US product categories. Some goods will receive duty-free access immediately, while others will see tariffs halved and fully phased out within five to ten years.
"….customs duties on originating goods provided for in the items in staging category EIF shall be eliminated entirely, and these goods shall be duty-free on the date of entry into force of this Agreement…customs duties on originating goods provided for in the items in staging category A shall remain zero," reads the document, without specifying items under those categories.
The agreement is expected to take effect 60 days after both sides complete their legal procedures.
Potential impact on investment
The agreement allows the US to take action against companies operating in Bangladesh if they export goods to the US at below-market prices. It also permits action if a foreign firm exports to third countries at below-market rates and a US company claims injury as a result.
Hafizur said this could deter investors, particularly from China and other countries, who view Bangladesh as a low-cost production base for exports to the US.
Asked how "market rate" would be defined, Abid said the US would determine it, recalling that past anti-dumping cases used production costs plus a 20% profit margin.
Revenue collection, intellectual property
The agreement is expected to boost Bangladesh's garment exports by granting zero reciprocal tariffs on apparel made from US cotton. India and Pakistan, which rely on domestic cotton, will not receive similar benefits, potentially giving Bangladesh an edge.
The US will offer tariff concessions on 6,710 products, while Bangladesh will benefit on 1,638 items.
Hafizur said the US has cut duties on its exports by 50%, leaving only VAT and advance income tax, which could reduce Bangladesh's revenue and weaken protection for domestic industries.
On intellectual property, Bangladesh must accede to 13 treaties outside the WTO framework, a process both experts said would pose significant legal and economic challenges.
Regulatory and labour obligations
Bangladesh has agreed to remove non-tariff barriers, licensing requirements and restrictions on US products, accept US certifications unilaterally, and comply with safety and emissions standards set by agencies such as the FDA.
It must also ease barriers for reinsurers, expand freedom of association for workers, resolve criminal cases against factory workers, establish a minimum wage review mechanism, and strengthen IP enforcement.
Bangladesh will also have to ratify or accede to a dozen global conventions, including the Berne Convention, within three to five years.
Commercial purchases for Bangladesh
Commercial purchase deals under the agreement include Bangladesh's acquisition of 14 Boeing aircraft, with an option to buy more, a long-term offtake of US liquefied natural gas valued at an estimated $15 billion over 15 years, procurement of at least 700,000 tonnes of wheat per year for five years, 2.6 million tonnes or $1.25 billion worth of soy and soy products over one year, and cotton worth $3.5 billion.
Regarding the Boeing aircraft, Commerce Adviser Sk Bashir Uddin told journalists that Bangladesh would spend between TK30,000 and 35,000 crore to purchase them, payable over 20 years, averaging roughly Tk1,500 crore per year.
Security clauses
While protecting US business, Bangladesh must take precautions in trades with countries that face US economic or national security concerns.
The agreement states: "Bangladesh shall adopt or maintain a complementary restrictive measure, in accordance with its laws and regulations, in support of the US measure" if the US imposes a "border measure or other trade action" to protect its economic or national security.
The deal restricts Bangladesh's defence purchases. "Bangladesh shall endeavour to increase purchases of US military equipment and limit military equipment purchases from certain countries."
It also dictates which countries Bangladesh should do business with: "Bangladesh shall adopt measures to encourage shipbuilding and shipping by market economy countries."
Facilitating US investment
The deal also facilitates US direct investment in exploration and mining of critical minerals and energy resources in Bangladesh, as well as in power generation, telecommunications, transportation, and infrastructure, on terms no less favourable than those offered to local investors.
The agreement requires Bangladesh to stop subsidising state-owned enterprises producing commercial goods that may discriminate against US goods and services.
Bangladesh agrees to do all these to get some tariff relief in exchange for helping the US minimize its trade gap – roughly $6.1 billion in 2024 – with Bangladesh.
Limited tariff benefits
In return, the US has pledged to create a mechanism allowing a limited volume of Bangladeshi apparel and textile exports to enter duty-free, linked to the use of US cotton and man-made fibres.
Other Bangladeshi goods will face an additional ad valorem duty capped at 19%.
The White House said the agreement builds on the 2013 Trade and Investment Cooperation Forum Agreement and would provide "unprecedented access" to each other's markets.
USTR Jamieson Greer said the deal marked "a meaningful step forward" in opening markets and creating new opportunities for American exporters.
