Trump’s tariff policy poses major blow for Bangladesh’s export sector

The three-month suspension period of Trump’s tariffs is about to expire. The US administration has started announcing new reciprocal tariffs in line with the initial plan announced in April. This move will create new uncertainties in global trade and the world economy.

The imposition of a 35 per cent reciprocal tariff on Bangladeshi export goods by the United States is a major economic blow, especially for the ready-made garment (RMG) sector. While the previous US tariff rate was around 15 per cent, it is now more than double. This sudden and steep increase in tariffs could undermine the competitive advantage of Bangladesh’s apparel exports.

The US is Bangladesh’s largest export market. In 2024 alone, Bangladesh exported approximately USD 8.5 billion worth of goods to the US. The burden of the increased tariffs will fall directly on garment producers and also impact millions of workers, most of whom are women.

This will also result in the risk of reduced growth, decreased employment, and increased poverty. These problems are not just economic in nature; they will also trigger social consequences.

The rationale behind these retaliatory tariffs is not strong and it has only increased concern. It is still unclear what tariff rates will be applied to Bangladesh’s major competitor countries such as Vietnam, India, Indonesia, Sri Lanka, and Pakistan.

Among the 14 countries included in the first phase, the 35 per cent tariff imposed on Bangladesh is among the highest. If it turns out that the tariff rates on competitor countries are lower than on Bangladesh, then the country will face a major blow in terms of competitiveness. Consequently, it will be difficult to make supply chain-based decisions. Buyer and investor confidence will also enervate.

The broader impact of this situation is even more serious. If production costs rise, the US buyers may shift toward countries with lower tariffs. Apparel exports account for more than 80 per cent of Bangladesh’s annual export earnings. This shock has made Bangladesh extremely vulnerable.

Even more concerning is that Bangladesh’s representatives involved in bilateral tariff negotiations with the US seem to have failed to bring a positive outcome. The failure to reach a balanced agreement increases Bangladesh’s risk further in light of current global trade realities and shifting geopolitics.

There is no denying that in an increasingly uncertain and unstable global trade environment, countries like Bangladesh are at greater risk. This is because Bangladesh has limited export product diversity. In addition, our domestic business and investment environment lags in competitiveness, and diplomatic influence is limited. Under these circumstances, Bangladesh must adopt strategic and multifaceted measures to ensure future economic security.

First, the highest priority must be given to increasing export diversification and competitiveness. This requires investment in productivity, technological upgrades, and development of new industrial sectors beyond garments. Overreliance on North American and European markets and apparel products makes Bangladesh more vulnerable to such external shocks. Therefore, diversification of both products and markets is no longer optional, rather it is exigent.

Second, Bangladesh must accelerate negotiations on free trade agreements with major trade partners. It should pursue FTAs with emerging economies in Asia, Africa, and Latin America, and strengthen South-South trade (with other developing countries) and economic cooperation. Through preferential access and the removal of trade barriers, export markets can be expanded, and dependency on specific markets can be reduced.

Third, domestic trade reform is essential. This includes reducing tariffs, minimising non-tariff barriers, and simplifying import-export procedures. These reforms will not only strengthen Bangladesh’s position in trade negotiations but also help reduce production costs, attract foreign investment, and encourage sector-based diversification.

The reality is that international trade policies are constantly evolving. In this context, Bangladesh’s response must be timely, strategic, and multidimensional. Failure to adapt quickly will deepen economic risks and stymie our future prospects.