How new US tariff will affect Bangladesh’s trade

The Trump administration has imposed a new 10 per cent tariff on Bangladeshi goods, citing Bangladesh’s alleged failure to adequately enforce a ban on products made with forced labour.

The United States has also imposed tariffs of 10 per cent to 12.5 per cent on imports from 60 other countries, including India, Vietnam, Indonesia, Cambodia and Pakistan.

The new tariff will be collected by US Customs in addition to existing import duties. For example, Bangladeshi products currently face an average tariff of 15 per cent, which will now rise to a combined 25 per cent with the additional 10 per cent levy.

The same approach will apply to other affected countries. Although importers pay the tariff, higher duties generally discourage companies from sourcing products from countries facing steeper trade barriers.

Regarding how much impact the new tariff will have on Bangladesh’s merchandise trade, several exporters said that after a US court suspended the reciprocal tariffs in February, a 10 per cent tariff was imposed under the Trade Act of 1974.

As that tariff is coming to an end, a new 10 per cent tariff is being imposed. As a result, there is no change in the overall tariff rate. However, the concern is that the Trump administration is conducting another investigation. It remains to be seen whether that will lead to the imposition of any additional tariffs.

The Office of the United States Trade Representative (USTR) announced the new tariff in a notice published in the Federal Register on Thursday. Goods already in transit to the United States before 12:01 am on 28 July will be exempt from the new duty.

The tariff has been imposed under Section 301 of the Trade Act of 1974 and will apply to about 99.4 per cent of goods imported into the United States. However, certain products—including oil, gas, fertilisers and some food items—have been exempted.

In a statement, US Trade Representative Jamieson Greer said, “The United States has had a forced labour import ban for nearly a century, and rigorously enforces it; it’s well past time for our trading partners to do the same.”

“Today’s action will begin to correct what is both a human rights abuse and distortive trade practice to improve the welfare of workers everywhere,” he added.

On 2 April 2025, US President Donald Trump announced reciprocal tariffs on imports from countries around the world, including Bangladesh. Bangladesh initially faced a 37 per cent reciprocal tariff, but implementation was postponed for three months.

On 7 July, Trump reduced the rate to 35 per cent, and after further negotiations, it was lowered to 20 per cent on 2 August. The revised rate took effect on 7 August.

Bangladeshi exports to the United States already face an average tariff of 15 per cent, with reciprocal tariffs applied on top of that.

On 9 February this year, Bangladesh and the United States signed a reciprocal trade agreement under which the reciprocal tariff on Bangladeshi goods was set at 19 per cent.

Less than two weeks later, however, the US Supreme Court ruled the reciprocal tariffs imposed by Trump on Bangladesh and other countries unlawful. Within hours of the ruling, Trump announced a new 10 per cent tariff under the Trade Act of 1974, effective from 24 February.

Under the law, the president can impose such tariffs for up to 150 days. The newly announced tariff will take effect immediately after that period ends.

The United States remains Bangladesh’s single largest export market. In the 2025–26 fiscal year, Bangladesh exported goods worth $9.04 billion to the US, up 4 per cent from $8.69 billion in the previous fiscal year. That means exports continued to grow despite the reciprocal tariffs.

About 85 per cent of Bangladesh’s exports to the United States consist of ready-made garments. The country competes mainly with Vietnam, China, Indonesia, India, Cambodia, Mexico, Pakistan and Honduras in the US apparel market.

According to the USTR decision, imports from 17 countries—including Bangladesh, India, Argentina, the United Kingdom, Cambodia, Canada, Ecuador, El Salvador, Guatemala, Honduras, Indonesia, Jordan, Malaysia, Mexico, Pakistan, Sri Lanka, and Trinidad and Tobago—will face a 10 per cent tariff.

Meanwhile, imports from the European Union, Taiwan, Japan, South Korea and Switzerland will face total tariffs of either 10 per cent or 12.5 per cent. Products from another 38 countries—including China, Vietnam, Turkey, Brazil and Egypt—will be subject to a 12.5 per cent tariff.

When asked, Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told Prothom Alo, “Since the additional tariff rates on our main competitor countries in the US market remain the same, I do not see any reason for a fresh impact on exports. However, after the reciprocal tariffs took effect last year, demand in the market declined somewhat. We had expected that demand for our products would increase once the burden of those tariffs was lifted. But that is not happening anytime soon.”

Responding to another query, Mohammad Hatem said, “The imposition of this tariff on the allegation that Bangladesh has failed to properly enforce the ban on goods produced with forced labour is unfair and unreasonable. After the USTR launched its investigation, the Ministry of Commerce held a meeting with us. However, we were not informed about what ultimately transpired at the hearing.”

On 12 March, the USTR launched an investigation into whether Bangladesh and 60 other countries had taken adequate measures to eliminate forced labour in the production of goods.

Earlier, the agency had also initiated an investigation into 16 countries, including Bangladesh, to determine whether they had excess production capacity and were engaging in overproduction.

In Bangladesh’s case, the investigation is primarily focused on whether there is excess production capacity in the ready-made garment and cement sectors. The hearings have already concluded, and the USTR may publish its investigation report soon.

When asked, Mahmud Hasan Khan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told Prothom Alo, “Ultimately, if our tariff is higher than that of our competitors, we will be in trouble. Otherwise, there is no reason to worry."

"Even though the reciprocal tariffs were suspended, US buyer companies have been negotiating prices for readymade garments by factoring in an equivalent tariff. They believed that the same level of tariff could be imposed through another mechanism,” he added.