Trump Tariffs: Bangladesh’s lack of leverage sees it brace for higher US tariffs
Nikkei Asia:
Concerns are rising over Bangladesh’s lack of leverage in trade negotiations with the U.S., after U.S. President Donald Trump unveiled a higher-than-expected tariff for the country if no deal is struck before Aug. 1, with business leaders and analysts expecting the proposed 35 per cent levy to have a severe impact on the country’s vital garment industry.
Compounding worries is the 20 per Cent rate secured by Vietnam, a key regional trade rival in ready-made garment (RMG) exports, which it reached by swiftly offering concessions. Dhaka now faces criticism for reacting slowly to secure a deal.
“It will be devastating,” Katrina Ell, director and head of Asia-Pacific economics at Moody’s Analytics, told Nikkei Asia, noting that around 20 per cent of Bangladesh’s garment exports are shipped to the U.S., the country’s single biggest export market.
The RMG sector accounted for just under 8 per cent of Bangladesh’s gross domestic product in the year through June. It is estimated to employ roughly 4 million people.
Ell said Moody’s expects Bangladesh’s GDP growth to reach 4 per cent in 2025 and 5.4 per cent in 2026. But if Bangladesh’s exports to the U.S. face a 35 per cent tariff — down slightly from the 37 per cent announced in April, but still far higher than business had hoped — for a sustained period, this forecast will almost certainly not come to pass.
With little product diversification, smaller overall trade volume and fewer imports from the U.S., Bangladesh will enter talks with few cards to play. “[Dhaka’s] leverage is relatively limited given that Bangladeshi goods are relatively easily substituted by other competitors,” Ell said.
Fazlul Hoque, managing director at Plummy Fashions, a company with significant exports to the U.S., said that with the new tariff, Bangladeshi garment makers would find it “almost impossible” to remain competitive with Vietnam.
Bangladesh already faced an average 15 per cent duty before Trump’s initial tariff announcement in April, but it is not yet clear whether the existing duty will be added to the new 35 per cent tariff unveiled Monday. That would push the total tariff to 50 per cent.
“Unless there’s a product that only we specialize in and Vietnam cannot produce, or if we develop a particular product, we will have to wait and see if buyers have any spare orders after choosing China and Vietnam,” Hoque said.
Hoque also expressed other concerns for Bangladeshi businesses, as India and Pakistan’s tariff rates have yet to be disclosed. “If they also get favorable rates, our nightmare will worsen,” he said.
Bangladesh’s lack of diversification does not mean the impact of tariffs will not be widely felt. Fahmida Khatun, executive director of the Centre for Policy Dialogue, noted that related sectors such as insurance, transport and infrastructure will also suffer, as will workers.
Besides continuing discussions with U.S. authorities, Khatun stressed the need for product and market diversification to avoid similar shocks in the future. “We haven’t explored markets for other products. For example, we are good at pharmaceuticals, leather products, light engineering, shipbuilding, fish and fish-related products, but we haven’t tapped into these markets,” she said.
But there is some hope in negotiations. Ell noted that U.S. consumers are sensitive to inflation spikes, and higher clothing prices will impact them quickly.