Trump’s Tariff Blow: Bangladesh’s $10b US market in crisis
Gazi Anowar :
Bangladeshi business leaders as well economists have expressed deep concerns over the country’s $30 billion ready-made garment (RMG) industry, focusing on the impact of U.S.
President Donald Trump’s tariffs on their exports, calling it a severe blow to Bangladesh’s growing trade with the U.S.
Bangladesh’s ready-made garment industry, a major driver of its economy, had long enjoyed strong export growth to the United States, with the value of exports crossing the $10 billion mark annually.
Syed Moazzem Hossain, President of Australian Bangladesh Chamber of commerce and Industry( ABCCI) told The New Nation that the 37 per cent increase is an additional tariff, meaning the total duty on RMG cotton-blend products will now stand at 54% (37% + 17%). So it is big threat for Bangladesh economy.
“Bangladesh is among the countries hit with one of the highest tariffs,” he said, pointing out that after this increase, Bangladesh’s tariff rate will be almost equivalent to that of China’s cotton products, he added. However, Trump’s trade policies, especially the imposition of tariffs on Chinese goods, have disrupted the global supply chain and introduced new hurdles for Bangladeshi exporters.
In 2018, Trump’s administration imposed hefty tariffs on Chinese goods in a move designed to address what the U.S. considered unfair trade practices by China. While China bore the brunt of the tariff burden, Bangladesh’s garment industry soon felt the ripple effects. As China moved to relocate some of its production, it inadvertently led to price competition that hurt Bangladesh’s competitive advantage in the U.S. market.
US President Donald Trump announced on Thursday morning that the US is imposing reciprocal tariffs to match duties placed on US goods by other countries.
During an event at the White House Rose Garden, Trump displayed a poster listing reciprocal tariffs, which included a 37% duty on Bangladeshi products as a response to 74% duties imposed on goods imported from the US.
Trump also announced a 10% baseline tariff on all imports and higher duties on some of the country’s biggest trading partners.
In response to Trump’s announcement, the interim government has said it is currently reviewing the tariffs on US imports.
“We are studying it. Since it is negotiable, we will negotiate and I am sure we can craft out the best deal,” the Chief Adviser’s Press Secretary Shafiqul Alam said quoting Prof Yunus as saying.
“The National Board of Revenue is identifying options to rationalise tariffs expeditiously, which is necessary to address the matter,” Chief Adviser’s Press Secretary Shafiqul Alam said in a statement posted on Facebook yesterday morning.
The Economic Impact
Economists argue that while the tariffs were primarily aimed at China, Bangladesh has suffered due to increased production costs, reduced demand, and shifting consumer preferences.
The U.S. market, which absorbs about 20% of Bangladesh’s garment exports, has seen changes in demand patterns, with more retailers opting to source from countries outside of the region, such as Vietnam and India, who were able to absorb the increased costs more efficiently.
Dr. Debapriya Bhattacharya, a prominent Bangladeshi economist and trade analyst, stated, “The tariffs have hit Bangladesh’s exports hard, especially in the garment sector.
Although we have managed to maintain a degree of resilience, the reduced orders from our U.S. partners, compounded by the global pandemic, have deepened the struggle for many factories.”
The export earnings from the U.S. market saw a steep decline in recent years, a factor which some economists attribute to the adverse effects of the trade war.
At the same time, increasing labor costs and logistical challenges have further eroded Bangladesh’s position in the competitive global garment market.
RMG Industry’s Struggles
Leaders of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) have consistently voiced their concerns about the negative consequences of Trump’s tariffs on their industry. According to BGMEA President Faruque Hassan, the industry is facing a multitude of challenges, including higher production costs, volatile market conditions, and stiff competition from other emerging markets.
“We have struggled to maintain our foothold in the U.S. market due to the tariff hikes. Our competitors are now benefiting from reduced tariffs and enhanced incentives, which has made it difficult for us to keep up,” Hassan commented.
Bangladesh’s garment sector, which provides employment to millions of workers, particularly women, is now grappling with the uncertainty of shifting global trade dynamics.
Factories are seeing a slowdown in orders and are being forced to adapt by diversifying their export markets to remain afloat.
Concerns over LDC graduation
Shams Mahmud, managing director of Shasha Denim Ltd, said that the new tariffs raise critical issues for Bangladesh, particularly as it prepares to graduate from its Least Developed Country (LDC) status.
“Bangladesh now finds itself facing higher tariffs for exports to the US than our competitors,” he said.
He also raised concerns over foreign companies relocating from China to Bangladesh to take advantage of US market access, saying this shift is now in question.
“Our tax collection system, which heavily relies on import duties, now needs to be reviewed in light of these tariffs,” Shams added.
What should Bangladesh do?
To mitigate the impact of the tariff hike, industry leaders have suggested that Bangladesh should take a two-pronged approach – first, by offering zero-duty access for US agricultural products, including cotton, and second, by increasing imports from the US.
Syed Moazzem noted that Trump has been advocating for such tariffs since 1988 as part of his efforts to reduce trade deficits with business partners.
Meanwhile, Sri Lanka has already proposed zero duty for all US imports, and India is also considering further tariff reductions.
In summary, he said the new tariffs will lead to a major shift in sourcing. “Favored destinations will Egypt, Jordan, Kenya, and Turkey.”
“Orders will stop moving from China to Bangladesh completely. Actually, some orders will move back to China as there is no duty difference between Bangladesh and China. Sweater and Jacket manufacturing will be greatly impacted,” he said.