Bangladesh’s economy is grappling with new challenges following the Trump administration’s announcement of sweeping changes to global trade policy. The United States has imposed a 37% reciprocal tariff on Bangladeshi exports, marking a significant shift in trade dynamics. Among South Asian nations, Bangladesh faces the second-highest tariff rate, exceeded only by Sri Lanka and Myanmar at 44%.

Comparative Tariff Rates for Key South Asian Exporters to the US:

• Sri Lanka & Myanmar: 44%

• Bangladesh: 37%

• Pakistan: 29%

• India: 26%

• Bhutan & Maldives: 10%

Ready-Made Garment (RMG) Industry Under Threat

As the backbone of Bangladesh’s export economy, the ready-made garment (RMG) sector is particularly vulnerable to these new tariffs. The United States, a key market for Bangladeshi apparel, imports $8.4 billion worth of garments annually, including non-knit suits, shirts, and knitwear. This sector alone contributes 80% of Bangladesh’s total exports and employs millions. The steep tariffs threaten to undermine its competitiveness, posing a significant economic challenge.

Bangladesh’s Diverse Export Portfolio at Risk

While garments dominate, other key export industries may also feel the impact. Bangladesh’s major exports include:

• Jute and Jute Products: Known as the "golden fiber," these include raw jute, jute yarn, and various jute-based goods.

• Footwear: Both leather and non-leather footwear are growing in demand internationally.

• Fish and Seafood: Shrimp, prawns, and other seafood products are key exports, particularly to the EU and US.

• Leather Goods: Items like bags, wallets, and belts are popular exports.

• Textiles and Miscellaneous Fabrics: Beyond apparel, Bangladesh exports a variety of textiles such as woven fabrics and paper yarn.

• Headgear and Caps: Though niche, these remain notable exports.

• Pharmaceuticals: An expanding industry with a growing international presence.

• Artificial Flowers and Feathers: Unique products catering to specific global markets.

Expert Perspectives on the Economic Impact

Professor Selim Raihan, executive director of the South Asian Network on Economic Modeling, highlights the significant risks posed by the US tariff policy. In a social media post, he expressed concern over the policy’s potential to weaken Bangladesh’s competitiveness in the US market, which accounts for 17-18% of the country’s global exports.

In 2024, Bangladesh’s exports to the US grew by 1.1% to $8.4 billion, while US imports to Bangladesh fell to $2.2 billion. This widened the US trade deficit with Bangladesh to $6.2 billion. The garment industry, a cornerstone of Bangladesh’s economy, faces substantial threats as the new tariffs create hurdles for maintaining market share in the US.

The Global Trade Context

The policy signals a departure from the WTO’s Most Favoured Nation principle, ushering in a more fragmented and unpredictable trade environment. Other Asian exporters like Vietnam, Japan, and China are also dealing with steep tariffs. China, for example, faces tariffs exceeding 50%, which analysts predict could reduce its US exports by 90% by 2030.

Retailers like H&M caution that these tariffs may increase consumer prices in the US. Meanwhile, experts anticipate retaliation from major trading partners, further destabilizing the global trade system. Analysts urge Bangladesh to adapt swiftly by reforming domestic trade policies, strengthening global partnerships, and engaging actively in trade discussions.