Why US tariff policies are sparking global outrage

Several years ago, an international research organization noted that in its quest to dominate the world through military power, the United States had become the most indebted nation globally. In contrast, Russia had isolated itself from the global system, becoming stagnant, while China, despite being a socialist country, rapidly achieved economic development by transforming its vast population into productive human capital. The report also stated that if China continued to expand its influence over the global market at the current pace, it would surpass the U.S. in economic power well before 2050. This prediction is already beginning to come true. China has overtaken Japan, ending its 44-year dominance to become the second-largest economy in the world.

In fact, China has already surpassed the U.S. in terms of purchasing power parity (PPP), though it still lags significantly behind in GDP size. The core of the U.S.-China rivalry in the international economic arena lies in China’s exceptional pace of economic advancement. China has successfully converted its vast population into an effective labor force and is innovating and utilizing technology in ways that other nations find difficult to match. In global trade, the U.S. is struggling to compete with China, and even its domestic market is increasingly dominated by Chinese goods. For years now, the two countries have been locked in a trade war. The U.S.'s recent decision to impose higher tariffs on imports from various countries is essentially an attempt to shield its deteriorating economy.

This approach isn’t new—during the Great Depression of the 1930s, the U.S. adopted similar tactics by sharply increasing tariffs on imported goods.

Former U.S. President Donald Trump, a businessman at heart, prioritized America's economic interests during his tenure. Upon assuming office, he declared an “America First” policy, aiming to place the U.S. at the top in all areas. Trump engaged in direct conflict with China, imposing additional tariffs on Chinese imports, which led to significant tensions between the two countries. The U.S. has consistently accused China of deliberately undervaluing its currency, the yuan, against the dollar, keeping its exchange rate artificially low rather than letting market forces determine it. As a result, U.S. products have struggled to compete with cheaper Chinese goods domestically. China, however, has denied these allegations.

Recently, the U.S. government announced sweeping tariff increases on imports from multiple countries. If implemented, Laos would face the highest tariffs at 48%, followed by Vietnam (46%), Sri Lanka and Myanmar (44% each), Bangladesh (37%), Pakistan (29%), India (26%), South Korea (25%), Malaysia and Japan (24% each), the EU (20%), and even Israel (17%), a close U.S. ally. Notably, no country has been exempted from these new tariffs. India, which regards the U.S. as a close ally, may have hoped for preferential treatment, but that expectation went unfulfilled. Indian opposition leader P. Chidambaram warned in an interview that if the U.S. goes ahead with the increased tariffs, India's economy could face serious turmoil within six months.

The U.S. has also imposed a 25% tariff on all imported vehicles, effective April 2. This decision is expected to severely impact India’s car exports to the U.S., potentially resulting in losses of up to $700 million. About one-fifth of India’s car production is destined for export, and 27% of that goes to the U.S. This example highlights the potential scale of impact the new tariffs could have, although the full consequences remain to be seen.

Bangladesh has enjoyed robust bilateral trade relations with the U.S. for many years. When Bangladesh began focusing on ready-made garment (RMG) exports, the U.S. and the EU played crucial roles in supporting the industry. Leveraging the U.S. quota system and the EU’s GSP benefits, Bangladeshi exporters expanded their RMG footprint in both markets. While the U.S. later revoked the quota benefit, it maintained limited GSP privileges. These were eventually suspended due to disagreements over labor rights and other issues and remain inactive today. Still, the U.S. and EU remain Bangladesh’s top trading partners with favorable trade balances.

Bangladesh is set to graduate from the least developed country (LDC) category in 2026. Upon graduation, the country will lose access to preferential trade benefits. While the EU has promised to continue GSP facilities until 2029 and transition Bangladesh to GSP+ thereafter, the latter comes with conditions Bangladesh may not be able to meet. On top of this, the U.S. is also planning to impose increased tariffs on imports from Bangladesh. If the U.S. enforces a 37% tariff on Bangladeshi exports, the consequences for the country’s export sector could be devastating.

Trade data illustrates the strength of U.S.-Bangladesh trade ties. In 2020, Bangladesh imported $1.85 billion worth of goods from the U.S., while exporting $6.06 billion—resulting in a trade surplus of $4.21 billion. In 2021, imports rose to $2.35 billion and exports to $8.28 billion, with a surplus of $5.93 billion. In 2022, Bangladesh imported $2.94 billion and exported $11.15 billion, recording a trade surplus of $8.20 billion. In 2023, imports totaled $2.24 billion while exports reached $8.27 billion, resulting in a $6.03 billion surplus. In 2024, imports stood at $2.21 billion and exports at $8.36 billion—yielding a surplus of $6.15 billion.

Economists describe this as the biggest shift in global trade policy in the last century, warning that the U.S.’s protectionist move could significantly disrupt global trade, especially for developing nations heavily reliant on the U.S. market. Many argue that the U.S.’s unilateral decision warrants reconsideration under the World Trade Organization’s framework. In retaliation, China has also increased tariffs on American imports, signaling a new phase of trade conflict between the two powers.

For Bangladesh, this situation poses a serious threat. The U.S. is the single largest destination for Bangladeshi exports, followed by the EU as a region. A 37% tariff on Bangladeshi goods would drastically reduce exports to the U.S. Bangladesh is not in a position to retaliate but could negotiate to bring the tariff down to a more manageable level—perhaps 10%, as applied to some other countries. The key, however, lies in improving the quality of locally made products and diversifying export items.

Additionally, Bangladesh must increase the production and export of goods made from local raw materials. Most of Bangladesh’s exports to the U.S. are from the ready-made garment sector, which has low value addition due to reliance on imported raw materials and machinery. In FY 2023-24, Bangladesh exported goods worth about $6.32 billion to the U.S., with $6 billion from RMG alone. Other sectors included leather and leather goods ($210 million), home textiles ($47.9 million), frozen foods ($16.4 million), and jute products ($15.2 million).

Many fear a severe disruption in Bangladesh’s export trade, particularly in the RMG sector. Since this sector heavily depends on imported inputs, including cotton and machinery from the U.S., any disruption will have wide-ranging effects. On average, Bangladesh exports $8.4 billion worth of goods annually to the U.S., with $7.34 billion from garments alone. Previously, the tariff on Bangladeshi exports was 15–16%, but it is expected to rise to 37%. Although the current interim government has cordial relations with the U.S.—with prominent figures like Dr. Muhammad Yunus enjoying high regard in Washington—Bangladesh should initiate high-level bilateral talks to seek reduced tariffs. A shift from 37% to 10% could significantly mitigate the damage.

Long-term dependence on RMG alone will not sustain Bangladesh’s place in global trade. The country must diversify both its export products and markets. In today’s world, no country can thrive in global trade merely on goodwill. Bangladesh must craft its trade policy with this reality in mind.

M. A. Khalek is a retired banker and a writer on economic affairs