Trump's trade war: What it means for Bangladesh's agricultural sector

As part of President Donald Trump's "Make America Great Again" initiative, the US has introduced a new "Reciprocal Tariff" policy, which will impose additional tariffs of up to 37% on Bangladeshi export products. This policy is set to have significant repercussions on Bangladesh's garment industry, which accounts for 80% of the country's export revenue.

In response, the relevant Bangladeshi authorities have started reviewing the tariff rates on affected products. This development calls for an in-depth analysis of how Bangladesh's agricultural sector may be affected, as well as the potential challenges and opportunities that lie ahead.

A "reciprocal tariff" is a trade policy where one country imposes tariffs on another country's products, and in return, the second country reciprocates with equivalent tariffs on the first country's products. To illustrate, if a product imported from abroad costs Tk100 and the government imposes a Tk20 tariff, the final price will rise to Tk120.

Previously, the tariff rate on Bangladeshi products in the US averaged around 15%. However, with the new policy, this has increased by 37%, bringing the total tariff to 52%. In other words, for every product worth 100 taka exported to the US, Bangladesh now faces a tariff of Tk52, a sharp increase from the previous Tk15.

The Trump administration's new tariffs are expected to expand the market for US agricultural products, according to the current US government strategy. If a country fails to balance trade by importing agricultural products, the US might attempt to fill that gap by selling arms, ammunition, or military equipment.

According to the US Department of Agriculture (USDA), Bangladesh regularly imports a variety of agricultural products from the US, including grains, seeds, soybeans, corn, cotton, wheat, peanuts, dairy products, agricultural machinery, and fertilisers. On the flip side, Bangladesh exports garments, leather products, textiles, and agricultural goods to the US

In 2024, Bangladesh imported $2.2 billion worth of goods from the US, while its exports to the US totalled $8.4 billion. This trade imbalance may prompt the US to pressure Bangladesh to increase its agricultural imports, which could potentially disrupt Bangladesh's agricultural economy.

A significant portion of Bangladesh's rural population still relies on agriculture for their livelihoods, and the influx of subsidised, cheaper US agricultural products could pose a major threat. Marginal farmers might struggle to compete, putting food security, rural livelihoods, and local production systems at risk. Policymakers need to approach this issue strategically to safeguard the interests of local farmers.

The USDA forecasts that Bangladesh will import 8 million bales of cotton in the 2024-25 marketing year, making it the world's top importer of cotton, surpassing China. Cotton is a key raw material for Bangladesh's ready-made garment industry, and the US has long been a primary supplier. However, the potential for growth in this sector is limited. 

Competing countries like India and Brazil, which are also major cotton exporters, offer cotton at lower prices, challenging the US's position in the market. Additionally, the increasing use of synthetic fibres in the garment industry is reducing the demand for natural cotton. As a result, US cotton exports to Bangladesh face limited prospects in the long run.

With the growing demand for poultry, fish, and dairy production, the need for corn in Bangladesh has also increased. Bangladesh's annual corn demand is approximately 7 million tonnes. In the 2023-24 fiscal year, local corn production exceeded 6.8 million tonnes, and due to its ease of production and strong market demand, farmers are increasingly turning to corn cultivation.

In 2023, Bangladesh imported nearly $250 million worth of corn, mainly from India, Brazil, and Argentina. However, importing corn from the US presents logistical challenges. Due to the long distance, transportation costs are high, which drives up the product price. Countries like India and Brazil offer corn at more competitive prices, making them more attractive to Bangladeshi businesses. Despite pressure from the US, it seems unlikely that Bangladesh will easily shift to US corn imports.

Bangladesh imports around 1.06 million metric tonnes of soymeal annually, with the majority coming from Brazil (404,000 metric tonnes), Argentina (346,000 metric tonnes), and India (227,000 metric tonnes).

In the 2023-24 fiscal year, Bangladesh imported approximately 2.7 million tonnes of soybeans, 37% of which came from the US. Although the US is striving to capture a larger share of the soybean market, high prices, long transportation times, and limited domestic processing capacity put US products at a disadvantage. In contrast, South American countries provide faster and more competitively priced supplies.

Bangladesh's limited arable land means farmers must maximise production on small plots. Fertilisers and water are essential for high-yielding crops such as hybrid varieties. Bangladesh currently imports urea, DAP, and TSP fertilisers primarily from China, Morocco, and Egypt, with China supplying around 64% of the total. Due to the higher prices of US fertilisers and the significant subsidies provided by the Bangladeshi government, other suppliers dominate the market over the US.

While mechanisation in Bangladesh's agricultural sector is on the rise, with fewer labourers and greater efficiency due to machinery, the US plays a limited role. India, China, and Europe are the primary suppliers of agricultural machinery, with India providing 89% of the equipment. US machinery is often more expensive and larger than what is suitable for Bangladesh's small-scale farms, and the lack of service centres and spare parts for US machinery further limits its appeal. As a result, the potential for importing US agricultural machinery remains restricted.

In conclusion, Bangladesh's agricultural trade relationship with the US is unlikely to undergo drastic changes in the near future. The potential for expanding the export market for agricultural products from Bangladesh still appears limited, primarily due to the lack of modernisation in production, transportation, customs, and supply systems in line with international market demands. While various projects have been implemented in the name of development, they have not brought about significant changes for farmers.

Though the US's direct role in Bangladesh's agricultural sector remains limited, American technology could play an important role in agricultural research and modernisation. However, it is vital to ensure that, in the name of modernisation, marginalised farmers are not left behind. Bangladesh's fertile land, hard-working farmers, local researchers, and government cooperation have propelled significant progress in the agricultural sector.

However, in the era of climate change, the government must focus more on maintaining agricultural continuity and driving modernisation. While various sectors have proposed reforms, the government's stance on food security and agricultural modernisation remains unclear. Whether the government will adopt new and modern strategies in response to Trump's tariff policies remains to be seen.

If Bangladesh continues to rely too heavily on the garment sector and fails to modernise agriculture, the country's labour-export economy may face challenges in the future as robotics and AI technologies begin to reshape the garment industry.

Md Arif Hossain is a Fellow at Cornell University and a Global Fellow at Michigan State University.Email: mdarif.hossain@cornell.edu

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