Bangladesh and the US tariff storm

US President Donald Trump yesterday stood in the White House Rose Garden, pointing to an oversized placard with details of levies he is set to impose on imports from America’s trading partners. Trump dramatically ratcheted up his trade war. Bangladesh is among those countries whose labor-intensive export industries will receive a heavy blow.

Under Trump’s “reciprocal tariffs” policy, Bangladeshi exports to the United States now face a 37% levy — a move that threatens to strain trade with its largest single-country export market.

Trump has targeted nations, accusing them of putting disproportionate barriers to American exports. He imposed 10% universal tariffs on all US trade partners as well as additional, heavier duties on 60 countries he deemed the “worst offenders” of unfair trade practices. The universal tariffs will start on Saturday before the country-specific, higher reciprocal tariff takes effect from April 09. 2025.

The penalties unleashed turbulence across world markets and drew condemnation from many countries facing the end of an era of trade liberalization that has shaped the global order for decades.

While significant for Bangladesh, this move aligns with similarly stringent tariffs across the region, suggesting a broader strategic intent rather than targeting Bangladesh alone.

Notably, Vietnam, a close competitor for Bangladesh in the international garment trade, faces an even higher tariff of 46%, despite the Southeast Asian nation’s proactive attempts to mitigate tariff threats by cutting levies on American goods and pledging to increase imports of significant US products.

However, this offers little comfort to Bangladesh. Its economy, heavily reliant on exports to the United States, particularly garments, now faces headwinds.

“For countries like Bangladesh and other developing countries, this shift poses significant challenges, as they may face tougher economic conditions under such an uncertain regime,” Professor Selim Raihan, executive director of the South Asian Network on Economic Modeling, said.

Industry experts in Dhaka fear the sharp increase in tariffs could erode Bangladesh’s competitive edge, potentially diverting US buyers to other countries. Still, the US will remain Bangladesh’s largest single-country export destination, with apparel constituting about 90% of total exports to American markets.

Bangladesh’s exports to the US rose 1.1%YoY to US$8.4 billion in 2024, driven largely by the country’s dominant garment sector, according to data from the United States Trade Representative.

Bangladesh’s imports from the US totaled US$2.2 billion in 2024, a 1.5% decrease from the previous year. As a result, the US trade deficit with Bangladesh widened to US$6.2 billion — a figure that determined the new tariff rate.

“The immediate priority is damage control, as the reciprocal tariffs are already in effect, with no time allowed for a smooth transition. Even goods currently en route to the US will be subject to the new tariffs, raising the critical question, who will bear the cost?” said Zahid Hussain, a former lead economist of the World Bank’s Dhaka office.

Bangladesh’s strategy should aim to shift the tariff burden onto buyers, according to Hussain. “A key advantage is that buyers have limited alternatives, as many of our competitors face similar or even higher reciprocal tariffs. However, fierce competition among [local] sellers poses a significant challenge, enabling wholesale buyers like Walmart and Target to pass the tariff costs onto us,” he said.

To counter this, it is crucial for sellers to collectively agree not to accept a reduction in prices to offset the tariff. The relevant association must closely monitor renegotiated prices and enforce penalties for non-compliance with this agreed position, Hussain said.

“Additionally, we should explore the possibility of qualifying our exports for duty exemptions by emphasizing their status as low-priced essential products.”

Analysts point out this escalation is part of broader regional trade realignment, as neighboring India and Pakistan also face reciprocal tariffs of 27% and 29%, respectively.

India’s export competitiveness would be less impacted than that of key rivals due to its position in the middle of the tariff rates, said the country’s industry bodies and the Federation of Indian Export Organizations.

The tariffs would remain in effect until Trump determined that the “threat posed by the trade deficit and underlying non-reciprocal treatment is satisfied, resolved, or mitigated,” the White House said.

Courtesy: The Bangladesh Chronicle