The imposition of new tariffs by the United States threatens to disrupt Bangladesh’s vital export sectors, particularly the apparel and pharmaceutical industries, which contribute significantly to the country’s economy.

With the US targeting key markets, experts are warning of potential declines in demand and heightened competition, which could harm Bangladesh’s position in global trade.

Economists and industry leaders are now stressing the need for immediate action through negotiations and strategic changes to safeguard Bangladesh’s economic stability in the face of this escalating trade conflict.

Concerns over Bangladesh’s key export sectors

Dr Selim Raihan, executive director of the South Asian Network on Economic Modelling (SANEM), has raised alarm about the potential consequences of these tariffs, particularly for Bangladesh’s apparel and pharmaceutical industries.

“The introduction of reciprocal tariffs signals a fundamental shift in global trade,” he said, adding, “These industries, which are vital to Bangladesh’s export earnings, are now at serious risk due to the higher tariffs.”

He noted that Bangladesh faces a 37% tariff under the new system – significantly higher than for other countries like India, and lower than for countries such as Vietnam.

Dr Raihan pointed out that this tariff rate could harm Bangladesh’s competitive standing in sectors like apparel, where low-cost production is a key factor in maintaining export levels.

He also criticised the failure of the World Trade Organisation (WTO) to respond effectively to this new tariff regime, leaving countries like Bangladesh vulnerable without recourse through international trade agreements.

Impact on industry relocation and Bangladesh’s economic stability

The prospect of industry relocation is also under scrutiny.

Shams Mahmud, managing director of Shasha Denims, expressed concern over the implications for Bangladesh’s apparel sector.

“We now face a higher tariff structure for exports to the US compared to our competitors,” Mahmud said. “This poses a real challenge, particularly when considering that many industries had relocated from China to Bangladesh to take advantage of favourable trade conditions with the US.”

Shams Mahmud further warned that this situation could disrupt Bangladesh’s broader economic stability.

“As Bangladesh nears its graduation from Least Developed Country (LDC) status, this new tariff environment makes the transition much more complex. The readymade garment (RMG) sector, which has been a cornerstone of the economy, could be severely impacted, and the country’s overall economic stability could come under stress,” he said.

Potential decline in US demand and global trade volatility

Prof Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), warned that the tariffs could lead to higher inflation in the US, triggering an economic slowdown.

“This could reduce demand in the US market, and the broader trade war could further reduce global demand, negatively impacting Bangladesh’s exports,” he explained.

Prof Rahman also questioned the accuracy of the US’s claim that its exports to Bangladesh face a 74% tariff, suggesting that Bangladesh should seek clarification on the calculation methods behind this figure.  “This is a point that must be raised in Trade and Investment Cooperation Forum Agreement (TICFA) discussions,” he added.

Given Bangladesh’s reliance on US cotton for its apparel sector, ensuring fair and transparent tariff rates is critical for the future of the industry.

Increased trade uncertainty and Bangladesh’s position

Dr Raihan also highlighted the broader implications of these tariff changes on the global trading system.

“The world has witnessed an unprecedented shift in global trade with the introduction of reciprocal tariffs by the Trump administration, signalling the possible end of, or at least a significant transformation to, the Most Favoured Nation (MFN) principle that has long been the foundation of the GATT/WTO framework,” he explained.

This shift, Dr Raihan noted, has created uncertainty about the future of trade, with tariff rates varying across different countries, making it difficult for Bangladesh to navigate its way through this unpredictable global landscape.

Further exacerbating the situation, Mohiuddin Rubel, former director at the Bangladesh Garment Manufacturers and Exporters Association, pointed out the broader impact of these tariffs. “All markets will face cost hikes in the days to come, and we will be severely affected,” he said.

“This decision will fuel inflation and recession in the US, while pushing up costs globally. We need to engage in immediate negotiations to discuss this issue for the survival of our garment industries.”

Rubel also noted that while some economies, such as Honduras, benefit from a lower 10% tariff, Bangladesh remains at a disadvantage.

Necessity for immediate negotiation and trade strategy

Zahid Hussain, former lead economist at the World Bank’s Dhaka Office, stressed the need for Bangladesh to urgently engage in negotiations with the US to address the tariffs.

“It is crucial that Bangladesh speaks to the US authorities about whether the data and calculations behind the 74% tariff on US exports to Bangladesh are accurate,” Zahid said.

“We must ensure that the tariffs are fair and properly calculated to avoid further harm to our export industries.”

Zahid Hussain also suggested that Bangladesh should explore opportunities for exemptions, particularly for essential items such as affordable readymade garments.

“If we can argue that these items are critical for the US market, we could potentially reduce the negative impact of the tariffs,” he added.

Policy recommendations

Zahid Hussain further emphasised the importance of collective action among Bangladesh’s exporters. “There needs to be a unified stance, where buyers, not suppliers, bear the additional tariff costs,” he said.  “This is the approach that businesses in the European Union have taken, and it is something Bangladesh’s trade associations, such as BGMEA and BKMEA, should consider adopting.”