What Bangladesh should do regarding US tariff

If any country imposes additional tariffs on imported goods, the first reaction is that the price of the concerned exported goods increases. The United States has imposed increased tariffs on imported goods from various countries. In order for Bangladeshi products to enter the US market in the future, an additional 35 percent tariff will have to be paid. Currently, an average of 15 percent tariff has to be paid for exporting Bangladeshi products to the US market. An additional 35 percent tariff will be added to that. That is, in order to enter the US market in the future, a total of 50 percent tariff will have to be paid on Bangladeshi products.

The United States is the single largest importer of Bangladeshi products. Among these, the country imports the most readymade garments. In the 2022–2023 fiscal year, Bangladesh exported a total of $46.43 billion worth of goods to various countries of the world. Among these, $8.52 billion were exported to the United States, which is 18.35 percent of total exports. In the 2023–2024 fiscal year, Bangladesh exported a total of $44.47 billion worth of goods to various countries. Among these, about $7.60 billion or 17.09 percent were exported to the United States.

In the 2024–2025 fiscal year, Bangladesh exported a total of $48.69 billion worth of goods to various countries. Among these, 17.99 percent were exported to the United States. Among the few developed countries with which Bangladesh has a favourable balance of bilateral trade, the United States is at the top. In the 2024–2025 fiscal year, Bangladesh imported a total of $2.5 billion worth of goods from the United States. At the same time, Bangladesh exported $8.76 billion worth of goods to the US market. As a result, the bilateral trade surplus in favour of Bangladesh is $6.26 billion. Bangladesh currently ranks second in the world market for readymade garment exports. According to the report of the World Trade Organization, China was at the top in 2024 in terms of readymade garment exports. The country exported readymade garments worth a total of $165 billion. China’s share in readymade garment exports is 29.64 percent. Bangladesh, in second place, exported readymade garments worth a total of $38 billion. The share of Bangladeshi readymade garments in the international apparel market is 6.90 percent. And Vietnam, in third place, exported readymade garments worth a total of $34 billion in the same year.

Their market share is 6.09 percent. In the 2024–2025 fiscal year, Bangladesh exported a total of $8.69 billion worth of goods to the United States, of which readymade garments worth $7.585 billion were exported.

If Bangladesh has to pay an additional 35 percent tariff on readymade garment exports in the future, then the countries on which the imposed tariff rate is comparatively lower will benefit. In the case of readymade garment exports to the United States, competing countries will be able to export readymade garments at a lower price compared to Bangladesh. And if consumers can buy products of the same quality from other countries at comparatively lower prices, they will lose interest in purchasing Bangladeshi products. Along with Bangladesh, countries like Vietnam, India, Pakistan or Sri Lanka that export goods to the United States—there is no American bias towards any one country. They will want to get quality products at comparatively lower prices. The producers of the country who can supply products at comparatively lower prices will have their products purchased by consumers. Therefore, it can be logically said that in order to get products at comparatively lower prices, US consumers may become interested in buying products from other countries.

Due to comparatively lower prices, US consumers may become interested in buying products from Vietnam, India, Pakistan or Sri Lanka. However, one advantage is that the additional tariffs have not been imposed only on Bangladeshi products. Additional tariffs have been imposed on the products of most countries. The countries on which a comparatively smaller amount of additional tariff has been imposed will be in a comparatively advantageous position in the US market. Of course, just because the price is low, no country’s products can take a place in the US market if the quality of the supplied products is not good.

That is, in order to hold the US market, the supply of quality products at comparatively low prices must be ensured. Because there are some consumers who will not hesitate to pay a high price for quality products. However, generally, the countries on whose export products comparatively lower rates of additional tariffs will be imposed will benefit somewhat. Because these countries will be able to market their products at lower prices. If the countries on which the United States has imposed additional tariffs reduce the tariffs on imported products from the United States, then the Trump administration may reduce the tariffs on imported goods from those countries. That is, a kind of tug-of-war can be seen here in the case of competition. There is a tug-of-war from Bangladesh’s side and from the United States’ side as well.

The United States wants to see whether, under pressure, Bangladesh reduces the tariff rate on goods imported from the United States. And Bangladesh is waiting to see whether the United States reduces the increased tariff rate imposed on Bangladeshi export products.

If the tariff rate imposed on Bangladeshi products is slightly lower compared to the countries that export products to the United States, then we will be in a comparatively advantageous position. And if a higher tariff is imposed on Bangladeshi products compared to the competing countries, then Bangladeshi products may fall behind in the competition. Readymade garments are at the top of Bangladesh’s export product list. Vietnam is the biggest competitor of Bangladeshi readymade garments in the international market. Previously, it was said that an additional 46 percent tariff would be imposed on Vietnam’s export products. And a 37 percent additional tariff would be imposed on Bangladeshi products. Vietnam, through bilateral discussions with the United States, has managed to reduce the proposed additional tariff rate imposed on them from 46 percent to 20 percent. And the tariff rate imposed on Bangladeshi export products has been reduced from 37 percent to 35 percent. As a result, it can be said with certainty that Vietnam will be in a comparatively advantageous position over Bangladesh in exporting products to the US market in the future.

The United States has imposed much higher additional tariffs on Chinese imported products compared to Bangladeshi ones. As a result, the presence of Chinese products in the US market may decrease in the future. They will lose market share. The same thing may happen in the case of Bangladesh.

The additional tariff imposed by the United States on Vietnamese products is 15 percent less than that imposed on Bangladeshi products. Currently, including the existing 15 percent tariff, Vietnamese products have to pay a total of 35 percent tariff to enter the US market. And Bangladeshi products have to pay 35+15 percent, that is, a total of 50 percent tariff to enter the US market. Vietnamese exporters will benefit from this comparatively lower tariff. The position of Bangladeshi products in the US market may become weaker. Taking this opportunity, Vietnamese products may take over the US market. In the future, there will be intense competition in readymade garment exports to the US market. Vietnam may overtake Bangladesh and take over the US market. Because the country has significantly reduced the high tariff rate imposed on it. This will strengthen their position in the US market. Due to the high tariff, there is a fear that Bangladeshi readymade garments will lose their current position in the US market. Signs of that are already visible. There was an opportunity for Bangladesh.

If Bangladesh had significantly reduced the tariff rate on imported products from the United States and could have conducted effective discussions with the country, then the additional tariff rate imposed on Bangladeshi export products might not have been so high. At this moment, it will not be possible for Bangladesh to significantly reduce import tariffs. Because the main source of Bangladesh’s revenue income is import tariffs. Therefore, if import tariffs are reduced significantly, the amount of revenue income will decrease. This could have a negative impact on Bangladesh’s revenue income. Because if Bangladesh reduces import tariffs, it will not only apply to the United States but also to other countries. As a result, revenue income will decrease significantly. The current interim government does not have the preparation and capacity to reduce import tariffs. The interim government has completely failed in collecting revenue. Not only that, they have become embroiled in conflict with the revenue department.

This could have an adverse effect on revenue collection in the future. During this conflict, revenue income will not increase but may decrease further. In such a situation, if import tariffs are reduced, there will not be enough money to implement the budget. In that case, there will have to be excessive dependence on foreign loans. Due to the situation, I am not able to engage in strategic trade here.

In international trade, Bangladesh should not fully follow a free market economy nor should it take a protectionist stance. We have to stay in a middle position between the two.

A large part of our revenue income comes from indirect taxes. We have to try to increase direct taxes. If conservative trade gives space to inefficiency, that is not good either.

We need strategic trade. But the reality is that Bangladesh is not able to do strategic trade. Vietnam is ahead of us in strategic trade. They have been able to reduce the high tariff rate imposed on them by the United States. But we have not been able to do that. One of the main objectives of trade is to earn dollars for the country. Dollar earnings can be increased by increasing product exports. Again, by increasing the production and use of local products as alternatives to imported goods, dollars can be saved. Emphasis should be placed on reducing imports and developing labour-intensive industries locally. Until 1980, we focused on import-substituting industries. Since then, emphasis has been placed on establishing export-oriented industries. In trade, we have to adopt a proper balanced strategy. If we can build import-substituting industries, dollars can be saved.

Again, if export-oriented industries are established, dollars can be earned. Whichever strategy seems effective and useful at a given time should be adopted. However, whatever type of industry is established, the ultimate objective must be to create broad-based employment opportunities, ensure higher value addition to the national economy, and ensure skill development. The readymade garment industry is at the top of the export product list of our country. But this sector is contributing relatively less value addition to the national economy, has long been receiving many subsidies, and is lagging behind Vietnam and China in terms of skill development. Therefore, export diversification is also necessary.

Dr MM Akash: Economist