The reduction of the reciprocal tariffs, imposed by the US administration on the exports of Bangladeshi products to the country, from 35 per cent to 20 per cent is a positive and commendable step for the export sector of Bangladesh.
The revised tariff rate has come as the major restructure of US’ reciprocal tariff structures, and that seems to be applicable to many trade partners of the country. Sri Lanka, for example, has their tariff rate reduced from 30 per cent to 20 per cent, Pakistan from 29 per cent to 19 per cent, while Bangladesh’s competitors Vietnam and India currently have 20 and 25 per cent respectively.
In this context, the revised reciprocal tariff rate on Bangladeshi products in the US markets is now comparatively consistent with the competing countries, and that indicates reducing risk of trade diversion. It possibly lowers the risk of a major shock on the export of the readymade garment sector.
Since the modifying reciprocal tariff rate in China has not yet been finalised, an important uncertainty remains in the global trade perspective. What rate the US will set for China, and that will play the prime role in the global trade flow in future because of China’s important position in the global production system, as well as the country’s various overlapping similarities with various export sectors of Bangladesh.
If China sees an imposition of a higher tariff rate, demand may shift in favour of the South and Southeast Asian exporting countries including Bangladesh. On the other hand, if China gets favoured relatively, competition may intensify. So, the final decision on China will become important for the reconfiguration of the global trade flows and dynamics.
The reduction of the reciprocal tariff to 20 per cent has brought short-term relief. However, it also raises the question of what Bangladesh has offered the US in return. Some commitments, such as agreements to import wheat, cotton, and aircraft, have already been revealed.
However, it is reasonable to assume that more sensitive commitments may have been made under non-disclosure agreements, which are unlikely to be disclosed to the public in the near future. This situation clearly highlights the need for greater transparency, oversight, and long-term strategic planning in Bangladesh’s trade diplomacy.
This experience serves as an important lesson for Bangladesh. It underscores the need to build more stability and resilience in the country’s foreign trade structure. Three strategic priorities emerge clearly from this experience. First, Bangladesh must intensify efforts to diversify its export products and enter new markets. A narrow export structure, based on a limited range of products and reliant on a few destinations—especially the US—exposes Bangladesh’s economy to unnecessary risks.
Second, effective reforms in trade, taxation, and investment policies are needed to enhance competitiveness and attract long-term foreign investment. Improving the regulatory and business-friendly environment will help position Bangladesh as a more stable and attractive trade partner.
Third, Bangladesh should now explore targeted free trade agreements (FTA) with emerging economies in Asia, Africa, and Latin America. Such agreements could provide protection against future protectionist pressures and help establish alternative export pathways.
Therefore, while the reduction in the US reciprocal tariff rate is encouraging, it does not raise any option for self-complacency. Rather, it presents both an opportunity and a warning. Bangladesh must act decisively now to establish a diversified, competitive, and resilient trade strategy.
* Selim Raihan is executive director of South Asian Network on Economic Modeling (SANEM)