Garment Industry Is on the Brink of Collapse. Thanks to Govt Inaction

Dr Ziauddin Hyder

The United States’ decision to impose a 35 per cent tariff on Bangladeshi garment exports from 1 August 2025 is not an unexpected policy shock at all. Rather, this is the predictable consequence of the long diplomatic inertia, bureaucratic confusion and government indifference that had persisted for months, if not years. What is now unfolding is a crisis that could have been averted if Bangladesh’s policymakers had demonstrated similar foresights that its competitors like Vietnam and India have shown.

The implications of the new tariff are nothing short of catastrophic. Combined with the existing 15 to 16 per cent duty, the total levy on Bangladeshi apparel entering the US market will now exceed 50 per cent, an insurmountable burden for an industry built on thin margins and fierce price competition. Predictably, global buyers are beginning to respond. Walmart has already paused about one million swimwear orders from Bangladesh, while other major retailers are actively reconsidering their sourcing options.

For Bangladesh, where the garment sector is not just the backbone of exports (contributing over 80 per cent of foreign exchange earnings) but also the source of around 10 per cent of the national GDP, the stakes could not be higher. A significant drop in orders could wipe out billions in annual export revenue, weaken the country's current account balance, and trigger contractions across related industries such as textiles, logistics and banking. The impact is existential not only for the garment sector but for the broader economy, threatening employment, foreign reserves and overall economic stability.

What is more distressing is that this calamity was neither unforeseen nor unpreventable. For months, industry leaders and trade experts had been sounding the alarm, urging the government to engage with Washington through robust diplomacy, high-level political dialogue, and strategic lobbying.

Yet the government has certainly failed to act with urgency or clarity of purpose. A critical reason behind this failure lies in the very nature of the interim government, which lacked political accountability to grasp the urgency of the situation. This institutional detachment from the pulse of the business community delayed crucial decisions on diplomatic engagement. In sharp contrast, Vietnam swiftly negotiated its tariff rate down to 20 per cent while India secured preferential treatment by leveraging its strategic ties with the US. This inertia has now cost the nation dearly.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has been forthright in its criticism, accusing the government of sidelining industry players throughout the negotiation process. By excluding those who possess a deep understanding of global trade dynamics and the specific complexities of the garment sector, the government’s approach was not only naive but fundamentally inadequate.

Even more troubling was the government’s failure to draw upon the insights and networks of major political actors who are closely connected to the people and the business community—actors who could have provided strategic guidance and political leverage in navigating US policy circles. This disconnect between the government, political leadership, and the private sector has severely undermined Bangladesh’s ability to defend its most vital export industry.

Beyond the economic calculations, the broader social cost of this crisis is staggering. If even a quarter of garment jobs are lost due to shrinking US orders, nearly 1 million young women could be pushed into unemployment. In a country where female workers’ participation is already low, the sudden return of such a large number of young women to economic inactivity would have devastating implications—not just for household welfare but also for social stability.

Unemployment on this scale could lead to a spike in early marriages, domestic violence, urban poverty, and even criminal exploitation, undoing decades of social empowerment fostered through women's participation in the workforce. Healthcare implications are just as severe as wage reductions or job losses will push healthcare out of reach for many, exacerbating vulnerabilities and driving up morbidity and mortality.

This is not merely a story of tariffs or trade policy; it is a narrative of governance failure. Yet, the window for corrective action is still open, albeit narrowing fast. The government must urgently dispatch a high-powered delegation to Washington with clear mandates and seasoned negotiators capable of cutting a deal. Concessions on value addition and regulatory compliance must be paired with demands for a substantial reduction in the tariff rate.

Simultaneously, an emergency relief package should be designed to protect the most vulnerable workers from the impending economic shock—through food assistance, cash transfers, and healthcare support.
In the meantime, Bangladesh must pivot towards diversifying its export markets for a long-term solution, particularly by strengthening ties with the European Union, the UK, and emerging regional blocs. Relying so heavily on the US market, without adequate policy buffers, has proven to be a strategic blunder.
This tariff crisis is not just about garments. It is a referendum on the competence and vision of Bangladesh’s political leadership. If bold, decisive action is not taken before 1 August, the consequences will reverberate beyond the factory floors, deep into the social fabric and future prospects of the nation. The time to act is not tomorrow, but today.
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The writer is Adviser to the 
Chairperson, Bangladesh Nationalist Party (BNP), and former World Bank Senior Health and Nutrition Specialist