With import tariffs on Bangladeshi products in the US market reduced to 20 percent, there has been a sense of relief in the country's economy. Bangladesh has also gained some additional benefits.

Economists and business leaders have said that this development presents an opportunity to utilise the experience and prepare for the future.

In April, the Donald Trump administration imposed a 37 percent tariff on Bangladeshi goods, creating a suffocating situation for the country's economy. The crisis deepened further as some of Bangladesh’s key competitors in garment exports were subjected to comparatively lower tariff rates.

Following several rounds of discussions with the United States, Bangladesh ultimately succeeded in reducing the tariff rate to 20 percent. At the same time, revised tariffs were imposed on other countries exporting to the US: China at 30 percent, Vietnam at 20 percent, India at 25 percent, and Pakistan, Indonesia, and Cambodia at 19 percent, while Sri Lanka faced a 20 percent tariff. As a result, despite the added tariff, Bangladesh has regained a relatively more comfortable position compared to the pre-April situation. In fact, with a lower tariff than its main competitor China, Bangladesh now enjoys a degree of competitive advantage.

Shovon Islam, former director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said that the imposition of a 37 percent tariff by the United States in April had left the country gasping for air. While key competitors and emerging apparel-exporting countries were subjected to lower tariffs, Bangladesh faced the brunt of the increase. Had the situation continued, Bangladesh would have lost its competitiveness. Meanwhile, the competing countries could have used their advantages to solidify their position in the US market. “We can now breathe a sigh of relief, as negotiations have helped reduce the tariff to 20 percent,” he said.

Speaking to Banglanews, he added that the effective tariff currently stands at around 36 percent. "This is a major challenge," he said. In addition to existing tariffs, India faces a 25 percent rate, Vietnam 20 percent, Pakistan and Indonesia 19 percent each. "This puts us in a relatively better-aligned competitive position with our rivals. However, we must focus on enhancing design innovation, production efficiency, industrialisation, and product diversification to strengthen our competitive edge."

Why US tariffs so significant for Bangladesh

Bangladesh is the third-largest apparel exporter to the United States. The US imports approximately $70 billion worth of ready-made garments annually, and Bangladesh has long held a significant position in this market.

In 2014, Bangladesh exported $7.3 billion worth of apparel to the United States. This figure dropped to $5.2 billion in 2020. However, exports rose again to $7.1 billion in 2021 and further to $9.7 billion in 2022, before falling back to $7.3 billion in 2023.

As a single destination, the United States remains Bangladesh’s largest export market. Around 20 percent of the country’s total garment exports go to the US. Between July and May of the 2024–25 fiscal year, Bangladesh exported garments worth $7.31 billion to the United States out of a total apparel export of $36.55 billion. Over the past few decades, Bangladesh’s apparel exports to the US market have shown steady growth.

According to data, approximately 90 percent of Bangladesh’s total export earnings from the US come from the apparel sector. In the 2023–24 fiscal year, out of a total of $7.59 billion in US-bound exports, $7.43 billion came from garments. The remaining 10 percent was contributed by leather and leather products, pharmaceuticals, plastic goods, and various agricultural products.

Thus, any sudden disruption in apparel exports significantly impacts the entire economy—leading to reduced export earnings, threats to employment, increased pressure on the financial sector, and the risk of social instability.

Against this backdrop, the US decision to increase tariffs posed a serious crisis for Bangladesh. Competing countries were subjected to relatively lower tariff hikes. Had Bangladesh been required to pay even 30 percent in tariffs, it could have fallen significantly behind in global competition.

To resolve the crisis, a Bangladeshi delegation led by Commerce Adviser Sheikh Bashir Uddin held continuous negotiations with US counterparts. Eventually, the additional tariff was successfully brought down to 20 percent.

Speaking to Banglanews on the matter, Fazlul Hoque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said, “The imposition of a 20 percent tariff has created a zone of relief for our exporters. This relief stems from the fact that the additional tariffs imposed on our competing countries are now fairly aligned. During the initial imposition by the Trump administration, we had fallen behind. Now, we are back in a position where we can compete.”

He stated that Bangladesh has now returned to the position it held prior to April. Moreover, emerging competitors like India are slightly behind Bangladesh. As a result, Bangladesh has reached a marginally better position than it had before the Trump-era tariff imposition.

Snehasish Barua, Director of SMC Advisory Services, considers the imposition of a 20 percent reciprocal tariff on Bangladeshi goods by the United States a strategic victory for Bangladesh. This has placed the country in a more competitive position compared to Pakistan (19 percent), Vietnam (20 percent), India (25 percent), and China (30 percent).

Speaking to Banglanews, he said that with declining interest in sourcing from China, the US market has opened up new opportunities for Bangladesh’s exports, particularly in the apparel sector. However, he warned against complacency in the wake of this achievement.

To remain competitive in the global market, Bangladesh must focus on enhancing productivity, improving product quality, and increasing value addition. In addition, regular engagement with buyers and a long-term roadmap for expansion in the world’s largest consumer market are essential.

Barua also observed that China's ability to endure and progress despite high tariffs offers a valuable lesson for Bangladesh.

Existing tariffs to remain in effect alongside new ones

For every country exporting to the US, different tariff rates have long been in place. Bangladesh, like China, Vietnam, India, Pakistan, Cambodia, and Indonesia, has traditionally paid such tariffs. Before April, the average product-based tariff was around 15 to 16 percent. As of August 1, an additional 20 percent tariff has been added on top of existing rates.

This means that Bangladesh will now face an effective tariff rate of approximately 35 percent for exporting goods to the US. Similarly, the newly imposed tariffs will also apply to exports from China, Vietnam, Cambodia, India, Pakistan, and Indonesia, alongside their existing tariffs.

In April, a 37 percent tariff was imposed on Bangladeshi goods, which was later reduced by 2 percentage points to 35 percent. During that time, Vietnam’s tariff was brought down to 20 percent, creating a disparity that triggered the crisis. Vietnam remains Bangladesh’s main competitor in the US apparel market.

Taufiq Ahmed Chowdhury, former Director General of the Bangladesh Institute of Bank Management (BIBM), told Banglanews that with the effective tariff now at 20 percent, the situation has essentially reverted to what it was before. He stressed that Bangladesh must now focus on productivity gains and cutting costs.

New opportunities for Bangladesh

Exporters see potential advantages for Bangladesh amid this reshuffling of tariff rates. Initially, as US tariffs on Chinese products increased, buyers began turning to lower-tariff countries like Bangladesh—something that happened in the past as well. Fazlul Hoque believes Bangladesh stands to benefit again under similar circumstances.

He said that capacity building must occur not only at the individual level but also through policy support from the government. Bangladesh needs to improve its energy efficiency, port capacity, and overall supply chain efficiency.

Shovon Islam, former Director of the BGMEA, remarked that the stabilization of the tariff at 20 percent has opened new doors of opportunity. He added that through a conducive environment and continuous innovation, Bangladesh's garment industry will not only withstand the current pressure but also expand its market share in the US and beyond.

He further noted that Bangladesh is negotiating with US buyers to share the burden of the additional tariff—particularly for shipments halted since July 31. If the 20 percent rate had not been finalized, buyers might have demanded more concessions and threatened to shift to other countries. However, since other countries now face similar tariffs, those buyers will lose leverage, giving Bangladesh a relative advantage.

Path to overcoming crisis

In Bangladesh, every crisis has historically given rise to new pathways. Be it the COVID-19 pandemic, the child labor issue, or the transition from quotas to a free-market system—each challenge has brought about transformation.

Fazlul Hoque said that the shock that was about to hit the garment industry this time should be taken as a lesson. Bangladesh must now strengthen its position. Initially, the government attempted to handle everything independently without consulting stakeholders. While dialogue might not have guaranteed better outcomes, collaboration would have been the right approach.

On this issue, Shovon Islam said, “We still insist that such problems should be resolved collectively. We have experience in this sector, and by working together, we can handle it efficiently.”

Time to focus on productivity

China's response to increased tariffs provides a guide for how Bangladesh can shield itself from such risks. Despite the higher tariffs, China has managed to maintain its export volumes by adopting technology-driven production processes and strengthening its market position.

Bangladesh must also increase the use of technology in its manufacturing processes. For this, long-term financing is essential, and the government can play a key role.

However, entrepreneurs believe that merely lowering tariffs will not ensure sustainable industrial growth. Government support is vital—especially in resolving issues related to gas and electricity shortages, infrastructural weaknesses, corruption, port congestion, problems in the banking sector, and policy barriers.