US orders surge for Bangladeshi garment factories

Since the US administration’s reciprocal tariff took effect, many American buyers have been negotiating with Bangladeshi factories for additional orders of ready-made garments (RMG). High tariffs on India and China have prompted these buyers to shift orders from those countries.

Not only that — as part of a long-term strategy to secure US orders, major Indian exporters have begun contacting top Bangladeshi exporters for garment production.

In addition, Chinese investors have shown interest in setting up garment factories in Bangladesh. Over the past two weeks, two Chinese companies have already signed investment agreements.

Several entrepreneurs in the export-oriented RMG sector said that in the past two weeks they have received increased inquiries from US buyers. Orders that had previously been suspended are now starting to return.

However, most of these inquiries are going to manufacturers who have long-standing relationships with American buyers — and a large portion of these orders are being relocated from India.

The United States is Bangladesh’s single largest export market for RMG. The top 10 apparel exporters to the US are Vietnam, China, Bangladesh, India, Indonesia, Mexico, Honduras, Cambodia, Pakistan, and South Korea. On 31 July, US President Donald Trump revised the reciprocal tariff on Bangladeshi exports to the US, raising it to 20 per cent — the same rate as Vietnam.

In comparison, Chinese goods now face a 30 per cent tariff, while Indian goods are taxed at 25 per cent — a rate relatively higher than some competitors. In addition, as “punishment” for purchasing Russian energy, Trump has imposed an extra 25 per cent duty on Indian products. This additional Indian tariff will take effect on 27 August, though the reciprocal tariff for all countries came into effect on 7 August.

BGMEA president Mahmud Hasan Khan told Prothom Alo that the US has imposed reciprocal tariff on products from all manufacturing countries. Many buyers will want to see how well consumers accept the increased prices. If consumers adapt to the tariffs, order volumes will rise.

He added that Bangladesh should try to attract American buyers who currently source from India but not from Bangladesh. This is because specific brands usually allocate a fixed portion of their total production to a given country. As a result, while the order shift may be temporary, there is a good chance it will not continue in the long run.

Snowtex Group is one of the country’s leading garment exporters, with exports worth nearly USD 300 million in the last fiscal year. About 28 per cent of this went to the US. They have already received additional inquiries from several US buyers.

Snowtex’s Managing Director SM Khaled told Prothom Alo, “Last year, one of our US buyers’ jacket orders ran on 7 production lines. The extra orders they want to place now will require 17 lines in total. Another US buyer, for whom we produced on 20 lines last year, now wants to add orders requiring an extra 10–15 lines. These orders are mainly being shifted from China and Vietnam.”

Khaled added, “We’ll need to invest about USD 250,000 to handle the extra work. If everything remains favourable, we expect our exports to exceed USD 350 million in the current fiscal year.”

In FY 2024–25, Bangladesh exported USD 8.69 billion worth of goods to the US, which is just over 18 per cent of the country’s total export earnings. More than 86 per cent of those exports were RMG, worth USD 7.54 billion.

Shovon Islam, Managing Director of another top garment exporter, Sparrow Group of Industries, said multiple US buyers are in talks to shift orders from India. One US company is also discussing moving next year’s summer orders from Vietnam to Bangladesh, because they are shifting high-value garments from China to Vietnam and moving medium-value garments from Vietnam to Bangladesh.

When asked, Shovon Islam said, “For next spring, we already have 5–10 per cent more orders than before, and for summer, we have 10–15 per cent more. To manage this, we have obtained buyers’ approval to increase overtime from 2 to 3 hours. We will also need government support to hold on to the business moving from India and China.”

Chinese company Handa (Bangladesh) Garments will invest about USD 40 million to set up an RMG factory in the BEPZA Economic Zone in Mirsharai, Chattogram. The company signed a land lease agreement with the Bangladesh Export Processing Zones Authority (BEPZA) on 30 July.

Another Chinese garment firm, Kaixi Group, will also invest in Mirsharai’s BEPZA Economic Zone. They will invest more than USD 40 million to produce underwear and other apparel, and signed an agreement with BEPZA last Wednesday.

From August 2024 to March this year, BEPZA received investment proposals from 34 Chinese investors. Between July and March, eight Chinese firms signed agreements with BEPZA to set up industries, with a total proposed investment of USD 150 million.

Alongside garments, these companies will produce bags, light engineering products, and other items.

Mohammad Hatem, president of the knitwear manufacturers’ association BKMEA, told Prothom Alo,“Chinese investment is very positive, because they will bring buyers along with their capital. This will boost our exports.”

He added that Bangladesh is in a favourable position due to lower tariffs compared to competitors, but to take on more orders, factories will need support from banks, adequate gas and electricity supply, and cooperation from customs.