How Bangladesh’s apparel industry can navigate the US tariff shock
The Trump administration’s newly announced “reciprocal tariffs” are set to more than double duties on Bangladeshi exports to the US, dealing a major blow to the country’s garment industry, which relies heavily on the American market
On Wednesday, President Donald Trump and the White House unveiled a list of new US "reciprocal tariff" rates, signalling significant changes for about 180 countries and territories that export goods to the United States.
According to the Trump administration, these new rates are roughly half of what each country imposes on American exports. The idea, they claim, is to level the playing field.
For Bangladesh, the impact is particularly harsh. Tariffs on Bangladeshi products have more than doubled, now ranging between 15% and 37%. The US is Bangladesh's largest export market for ready-made garments (RMG), with the country exporting around $8.4 billion worth of goods to the US in 2024 — of which $7.34 billion came from the garment sector alone.
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Naturally, these new tariffs will pose a serious challenge for Bangladesh's apparel exports. What's more concerning is the disparity in how different countries are being treated under the new policy.
China, the world's largest apparel exporter, faces a 54% tariff. Vietnam, the third-largest, will be hit with a 46% rate. Yet Turkey, the fourth-largest apparel exporter, will face just a 10% tariff, while India — the fifth-largest — will see a 26% tariff. Even Pakistan, ranked ninth, will face a 29% rate, which is still 8% lower than Bangladesh's.
This uneven playing field may hinder Bangladesh's hopes of capitalising on the "China plus one" strategy — a shift many global buyers are exploring to diversify their supply chains away from China amid ongoing US-China tensions. With Trump back in office and these new tariffs in place, Bangladesh's competitive edge in the US market could take a serious hit.
To add salt to the wound, buyers will consider this increased tariff while negotiating prices with the Bangladeshi apparel manufacturers which may result in increased price pressure for the manufacturers who are already suffering from higher production costs vis-à-vis lower prices.
In a prompt response to the newly announced US tariff rates, the Press Secretary to the Honourable Chief Adviser stated on Facebook that the government is currently reviewing its own tariffs on goods imported from the United States. He added that the National Board of Revenue (NBR) is actively exploring options to adjust and rationalise these tariffs swiftly in order to address the issue.
We trust that the Chief Adviser, with his leadership and diplomatic acumen, will take proactive steps to handle the situation. A high-level committee must be formed without delay to assess the implications and recommend appropriate responses.
According to the US Department of Agriculture's Foreign Agricultural Service (FAS), Bangladesh is the fifth-largest export market for US cotton. Interestingly, we allow duty-free import of US cotton to support our ready-made garment (RMG) industry. In light of this, Bangladesh could reasonably request reciprocal treatment from the US — specifically, duty-free access for RMG products that are made using imported US cotton.
Given that Bangladesh currently maintains a trade surplus with the US, and that key imports from America — such as scrap iron ($577 million), raw cotton ($339 million), and petroleum gas — play a vital role in powering our industries, the proposed high-level committee may also consider exploring the possibility of a Free Trade Agreement (FTA) or a Preferential Trade Agreement (PTA) with the United States.
Such a move could not only help offset the impact of the new tariffs but also strengthen long-term trade relations between the two nations.
To exhaust the immediate shock, the government should support the exporters with incentives, subsidies and subsidised finance in the upcoming budget. In the long term, we have to decrease our apparel export dependency on traditional markets like the USA and EU and gradually increase the export exponentially in non-traditional markets like the Asian and Middle East markets as well as in emerging economies.
Ashikur Rahman Tuhin is the managing director of TAD Group. He is a former Director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.
