Tariff war: What can Bangladesh's survival strategy be?

The protracted trade conflict between the United States and China has evolved into a global economic challenge, significantly affecting middle-class households worldwide. 

A 2024 report by the Peterson Institute for International Economics, cited by CNN, estimated that President Donald Trump's proposed tariffs could cost a typical middle-income American household at least $1,700 annually. This figure could potentially double when accounting for retaliatory measures and broader economic repercussions.

The introduction of the Reciprocal Tariff (RT) by the US administration has further complicated international trade dynamics. This policy entails a baseline 10% tariff on all imports, even after trade agreements are established, with possible exemptions for countries offering significant trade concessions. 

While a 90-day suspension of the RT provided temporary relief, it underscored the uncertainty facing global trade partners.

Bangladesh's strategic response

In response to these developments, Bangladesh has proactively sought to mitigate the adverse effects on its economy, particularly its vital ready-made garment (RMG) sector, which accounts for approximately 80% of the nation's export earnings. Interim leader Muhammad Yunus has engaged in diplomatic efforts to persuade the US administration to reconsider the 37% tariff imposed on Bangladeshi exports.

Bangladesh has pledged to increase imports of US goods, such as cotton, wheat, corn, soybeans, and liquefied natural gas (LNG). Notably, the country is on track to become the world's largest cotton importer in 2024-25, with US cotton comprising a significant share.

Proposals have been made to reduce tariffs by 50% on US exports like gas turbines, semiconductors, and medical equipment. Efforts are underway to remove non-tariff barriers, including simplifying customs procedures, streamlining packaging and labelling requirements, and enhancing trade facilitation measures.

The establishment of bonded warehouse facilities for US cotton imports aims to expedite delivery times and reduce costs. The approval of Elon Musk's Starlink satellite internet network in Bangladesh exemplifies the country's openness to US investment in high-tech industries.

Economic considerations and trade balance

Bangladesh's trade imbalance with the US, characterised by $8.4 billion in exports versus $2.2 billion in imports in 2024, has been a focal point in trade negotiations. To address this, Bangladesh has offered to reduce or eliminate tariffs on over 100 US goods, including agricultural products and scrap metals. 

These measures aim to foster a more equitable trade relationship and potentially lower the US-imposed tariffs on Bangladeshi exports.

Challenges highlighted by the USTR report

Despite these proactive steps, the US Trade Representative's (USTR) 2025 National Trade Estimate Report identifies several persistent barriers in Bangladesh:

High tariffs, investment hurdles, and entrenched corruption continue to undermine American businesses operating in Bangladesh. Issues such as complex customs procedures, lack of transparency in import/export regulations, and delays in submitting WTO notifications have been noted. 

Equity caps in sectors like petroleum, gas, and telecommunications, along with stringent requirements for no-objection certificates, hinder foreign investment. 

US companies report significant delays, sometimes exceeding a year, in repatriating profits due to bureaucratic hurdles. Pervasive corruption, lack of transparency in government procurement, and inadequate enforcement of anti-corruption laws remain significant concerns. Weak IPR enforcement, prevalence of counterfeit goods, and limited investigative capacity impede the protection of intellectual property. 

Regulations allowing government access to digital communications and data localisation requirements pose challenges for digital trade. Bangladesh remains suspended from the US Generalised System of Preferences (GSP) due to failure to meet international labour standards, with the US proposing an 11-point Labour Action Plan to address these issues. 

Strategic outlook

While the US remains a critical export market for Bangladesh, navigating the complexities of international trade requires a strategic and calculated approach. 

By closely monitoring trade agreements of other nations and aligning domestic policies to meet international standards, Bangladesh can enhance its competitiveness and foster more robust trade relations.

Ferdaus Ara Begum, CEO, BUILD-a Public Private Dialogue Platform, works for Private Sector Development

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of his employer or The Business Standard.