US tariffs: An opportunity in disguise for Bangladesh’s apparel industry

Bangladesh’s ability to fully capitalise on US tariffs depends on how strategically both the government and exporters respond. Photo: TBS

Starting from 7 August 2025, most apparel imports from key producing countries will face additional US tariffs. Branded as a "reciprocal tariff" by the US administration, these range from 15% to 50% on apparel imports from across the world. Such measures are certain to affect the purchasing power of US consumers. Coupled with heightened uncertainty in sales, this will create a more challenging environment for global business. 

The reciprocal tariffs, imposed sequentially on the top nine apparel-exporting countries to the US, are as follows: China 30%, Vietnam 20%, Bangladesh 20%, India 50%, Cambodia 19%, Turkey 15%, Mexico (exempted), Pakistan 19%, and Indonesia 19%.  

However, the US has warned China that tariffs could rise to 145% after 10 November if no convincing trade deal is signed before the deadline. India has similarly been cautioned, with tariffs potentially increasing to 75% after 27 August if a stronger agreement is not reached within the stipulated timeframe.

China and India are currently the first- and fourth-largest apparel exporters to the USA, respectively. Vietnam, the second-largest, is also subject to a 20% reciprocal tariff. Moreover, the US announced that goods transshipped from China via Vietnam would incur an additional 40% tariff. Although the US has yet to clarify the definition of "transshipment," experts suspect that apparel produced in Vietnam using Chinese raw materials, such as yarn or fabric, will also fall under this category.

This complex tariff situation offers Bangladesh, currently the third-largest apparel exporter to the US, a unique opportunity to expand its market share. At present, the USA is the single largest market for Bangladeshi apparel, with exports worth around $7.5 billion last fiscal year. In 2024, the US imported apparel worth $79.257 billion globally. Therefore, if Bangladesh can capture even a portion of the market share lost by China and India, the country's apparel exports could grow significantly.

Recent trends provide further reason for optimism. Between January and June 2025, Bangladesh's apparel exports to the US rose by 25% to $4.25 billion, up from $3.4 billion in the same period last year. During this time, China's exports to the US fell by $1.11 billion, while Vietnam's grew by $1.19 billion and Bangladesh's by $850 million.

Nevertheless, Bangladesh's ability to fully capitalise on this situation depends on how strategically both the government and exporters respond. A few key issues must be addressed to reap the benefits of this tariff environment.

First, under an executive order issued by US President Donald Trump on 1 August, the US Customs Department will apply tariffs only to the non-American portion of a product's value, provided that at least 20 per cent of its content is American. 

For instance, if a T-shirt worth $10 contains 20% US cotton, it would face a tariff of $1.60 instead of $2. This is because the 20% tariff imposed on Bangladesh would only apply to the $8 non-US portion of the garment. 

Bangladesh must therefore establish a quick and simple verification system for the use of US cotton. Immediate discussions with American partners are necessary to ensure straightforward verification procedures, enabling US Customs to easily identify garments containing US cotton.

Secondly, other apparel-producing countries will not remain passive. They will continue lobbying for more favourable tariff rates. Encouragingly, Bangladesh's commerce adviser confirmed last week that the government would persist in negotiating with the US to reduce the reciprocal tariff rate for Bangladesh to 15 per cent.

Thirdly, US President Trump has stipulated in his letter to Chief Adviser Yunus that ready-made garments (RMG) must contain a minimum of 40% local value addition to qualify for the "Made in Bangladesh" label. It is essential for Bangladesh to negotiate this requirement, as the country still imports around 50% of woven fabrics. The government must ensure that this condition is relaxed for Bangladeshi apparel exports to the US.

Finally, to take full advantage of the opportunity created by skilful negotiation with US counterparts, Bangladesh must ensure the "3Ps": uninterrupted power and gas supply to factories, political stability, and favourable policies to sustain the growth of the apparel industry, which remains the backbone of the nation's economy.

Sketch: TBS

Abdullah Hil Nakib is the Deputy Managing Director of Team Group. 

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.