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Published : 09 Jul 2025, 03:03 AM
The United States has ended Bangladesh’s brief reprieve. Starting Aug 1, all Bangladeshi exports will face an additional 35 percent tariff, bringing average duties to a whopping 50 percent and placing Dhaka under urgent pressure to strike a deal with the Trump administration.
Exporters and economists warn of serious consequences for Bangladesh’s largest export market.
Business leaders and analysts argue that Bangladesh squandered the three-month grace period granted earlier, failing both to reduce the bilateral trade deficit through increased US imports and to negotiate a deal.
Now, they say, the government must make aggressive use of the remaining diplomatic window left open by US President Donald Trump to avert more damage.
The fallout could go beyond the US market. Some fear a ripple effect in Europe as well, while the garments industry, which makes up over 85 percent of Bangladesh’s US exports, braces for intense competition from Vietnam, China, India, and Pakistan -- countries either already negotiating or finalising deals with the US.
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has already sought an appointment with the chief advisor to assist the interim government in handling negotiations.
Business leaders are also proposing the appointment of lobbyists in Washington to accelerate talks and secure concessions.
Meanwhile, a top economist has urged Dhaka to begin preparing medium-term strategies, improving competitiveness, diversifying products and markets, to protect its trade position globally.
Despite the new tariff measures, all doors are not yet closed. Bangladesh’s Commerce Secretary is en route to Washington to join the next round of negotiations with senior US officials, including Trump's national security advisors and trade representatives.
A new draft proposal from the US Trade Representative’s (USTR) office reportedly keeps the possibility of negotiation open.
A senior official at the Ministry of Commerce confirmed that the USTR has handed over a fresh draft, assigning the South Asia National Security Advisor and Security Advisor to oversee talks with Bangladesh.
SECOND WAVE OF TARIFFS
On Monday, Trump sent a letter to Chief Advisor Muhammad Yunus, formally declaring the additional duty on all Bangladeshi goods effective Aug 1.
This second round of tariffs, while slightly reduced from the earlier proposed 37 percent, is expected to hit Bangladesh’s export sector hard, particularly ready-made garments, the country's leading export to the US market.
Industry insiders warn that competing countries such as India and Pakistan have received relatively lighter tariff increases, raising fears that US buyers might shift orders there for cost efficiency.
“If you add another 35 percent to the current rates, then clearly the negotiations were weak,” said Mahmud Hasan Khan, newly elected president of the BGMEA.
He said, “If the new 35 percent was the total instead of being added to existing rates, then I would have said the negotiations were good.”
“People look at the result, not the effort. If you play 90 minutes well but concede a goal in the end, no one will care how well you played; you didn’t win, that’s what people will see.”
BILATERAL BARGAINING WEAKNESS
Mohammad Abdur Razzaque, chair of the Research and Policy Integration for Development (RAPID), was blunt: “Bangladesh has significant weaknesses in striking trade deals. We have no Free Trade Agreements (FTAs) at all.”
“We’ve never been part of any real trade agreement. That’s our weakness,” he said, noting that even the intense discussions that should have occurred around the US tariffs “didn’t take place across stakeholder groups”.
Bangladesh is among 14 countries now targeted by Trump’s latest tariff wave. Yet Vietnam, a key competitor in garments, has already secured a deal with reduced duties, and India is reportedly close to finalising one.
In early April, Trump imposed heavy tariffs on over 100 countries, including Bangladesh. Amid the shock, Yunus sent a letter urging Trump to reconsider and requested a three-month delay to implement the decision -- a request that was granted.
Bangladesh then announced duty exemptions for 626 products, fully removing tariffs on 110 of them to facilitate greater US imports and reduce the trade gap.
In his letter to Yunus, the US president emphasised the “very large” trade deficit between the two nations as justification for maintaining the tariff increase.
According to Trump, the decision follows "very persistent" concerns over tariffs, non-tariff barriers, and other trade policies adopted by Bangladesh that the US believes have contributed to a long-standing trade deficit.
"Our relationship has been, unfortunately, far from reciprocal. Starting on August 1, 2025, we will charge Bangladesh a tariff of only 35 percent on any and all Bangladeshi products sent into the United States, separate from all sectoral tariffs," Trump said.
The US must move away from the tariffs, non-tariff policies, and trade barriers imposed by Bangladesh that have created this situation, he added.
WHAT BANGLADESH DID IN THREE MONTHS
On Apr 2, Trump’s trade war announcement sent shockwaves worldwide. Though Bangladesh quickly responded with policy adjustments and a public commitment to negotiation, results on the ground were limited.
The National Board of Revenue (NBR) reviewed tariff structures and announced duty cuts on hundreds of US products. Still, this did not translate into any significant increase in US imports over the following three months.
Economist Mustafizur Rahman, distinguished fellow at CPD, explained the gap: “We can’t force the private sector to increase imports. They will import from where it’s beneficial.
“Government imports are limited -- some wheat and other goods -- but they also have to balance relations with other countries.”
He added, “Bangladesh is not ready to sign an FTA with the US. We reduced tariffs, yes. But if the US says ‘You’ve done it for everyone, not just us,’ we can’t argue. We’re bound by WTO rules.”
In his view, even if Bangladesh did not take enough steps to reduce the deficit, the 35 percent extra tariff lacks justification.
“Our deficit is only $5 billion. Vietnam’s is $125 billion, and they got concessions. Why hit us so hard?”
Still, he believes the government can reverse course if it strengthens its negotiating position.
SHRINKING MARKET, RISING COMPETITION
In 2024, Bangladesh exported $8.4 billion worth of goods to the US, $7.34 billion of which was garments. The tariff hike is expected to hit this core sector hardest.
The problem is compounded by the fact that India, China, and Indonesia are already in talks with the US. If they manage to secure reduced tariffs, Bangladesh risks losing market share.
“This is going to be massive,” warned BGMEA President Mahmud.
“About 20 percent of our garment exports go to the US. If costs rise, buyers will look elsewhere.”
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Executive President Fazlee Shamim Ehsan noted that Bangladesh’s main rival in shirts, Indonesia, has been hit with a similar 36 percent duty. So the playing field is still level in some areas. But the key is what deals China and India strike.
On Vietnam’s advantage, he said: “Yes, Vietnam has finalised a deal and may gain an edge in electronics and mobile phones. But in garments, they don’t yet have the capacity to take away our orders.”
Still, economists warn that the US market is shrinking due to rising product prices across the board. Bangladesh, with relatively fewer bargaining tools, could lose out in this tighter market.
IF VIETNAM CAN, WHY NOT BANGLADESH?
Vietnam has signed a new deal with the US, reducing tariffs on its goods to 20 percent, down from 46 percent in April. The country has become a hub for brands like Nike, Apple, Gap, and Lululemon.
Mustafizur said, “Professor Yunus sent a letter with offers, and later the budget included annexes too. But we don’t really know what we offered, or what the US wanted. Their agreement draft had a non-disclosure clause.”
“There wasn’t even a proper team formed to coordinate among stakeholders. This was a missed opportunity.”
Razzaque agreed, saying, “They didn’t consult stakeholders. The excuse is that the US demanded confidentiality, but even then, the government could have done better.”
He added that Vietnam’s offers, such as full tariff waivers for US goods, are not feasible for Bangladesh.
“Can we afford to import American cars duty-free? That would flood our market. We have low reserves and need to protect macroeconomic stability.”
Still, he acknowledged that Vietnam’s advantage may not drastically hurt Bangladesh. “Many of Vietnam’s exports are based on Chinese inputs. Trump has said that if there’s transshipment from China, a 40 percent surcharge will apply. That changes the game.”
WHAT CAN BANGLADESH DO?
Alongside Bangladesh, other countries facing the new tariff regime include Laos, Myanmar, Thailand, Cambodia, Serbia, Indonesia, South Africa, Bosnia and Herzegovina, Malaysia, Tunisia, Japan, and South Korea.
Among them, Myanmar and Laos face the highest rate of 40 percent.
Despite the harsh tariff hikes, Trump has left the door open for negotiation.
In his letter to Yunus, the president indicated a willingness to be flexible with countries offering more concessions.
“Adjustments can be made depending on the situation... we will not be unfair.”
In response, the Bangladesh government is now re-engaging.
Although talks with Washington began late, fresh discussions are under way.
A delegation led by Commerce Advisor Sheikh Bashir Uddin is in the US, with Commerce Secretary Mahbubur Rahman set to join on Tuesday.
Speaking at the Secretariat on Tuesday, Mahbubur said: “President Trump has sent a new letter imposing a 35 percent counter-tariff on Bangladesh, effective from the 1st of August.
“We’ve responded to the earlier draft framework agreement they sent. Multiple meetings have already taken place on that.
“I joined all the meetings virtually,” he added. “Our advisor and security advisor were physically present. Based on the latest document we received [on Tuesday], discussions will be held on the 10th and 11th of July.
“I’m heading to attend those talks.”
He said Bangladesh is considering prioritising purchases of food grains and military equipment from the US to reduce the trade deficit.
When asked what arguments Bangladesh will present, Mahbubur said the focus will be on reducing tariffs and avoiding trade-related disadvantages.
“We aim to protect our trade interests and retain our market share in the US,” he said.
He noted the US has asked for phased reductions in tariffs, VAT, supplementary, and regulatory duties.
According to him, Final decisions will be made after discussions with the NBR and other stakeholders.
Mahbubur said: “We may give the US some priority in government grain purchases. A large portion of our military gear also comes from the US, and those areas are under review too.”
Finance advisor also expressed optimism, noting that another meeting with United States Trade Representative (USTR) is scheduled.
“Whatever the decision is in that meeting, we’ll take next steps accordingly. So far, the discussions appear to be heading in a positive direction,” he said.
“The president has sent a letter. Now it will move to one-on-one negotiations.”
EXPERTS ADVISE NEGOTIATION, STRATEGY
BKMEA’s executive president stressed that Bangladesh needs better tools to negotiate. “We didn’t have many tools at hand, and whatever we had is still being used.
“Let’s see what happens in the next few days.”
He added that if needed, Bangladesh could even appoint an additional US lobbyist -- beyond the “efforts” of the commerce and national security advisors -- given that three weeks remain.
Economist Razzaque urged the country to stay prepared. “We need to assess what we can offer and what steps we can realistically take to convince them.”
Economist Mustafizur said, “There are still two or three weeks left. Through negotiations, we can explore whether the US will soften its stance and if we can offer more in return.”
He emphasised focusing on long-term competitiveness and market diversification.
Mostafizur also suggested that Bangladesh should aim to bring the tariff down to around 20% percent through dialogue.
BGMEA SEEKS TIME WITH CA
BGMEA President Mahmud has reached out to the chief advisor, requesting a meeting to ensure the industry’s involvement in the next phase of talks with the US, as the RMG sector is Bangladesh’s key export earner.
“While the government has already engaged in talks, some countries started earlier and had more success,” he said.
“We’ve learnt that the US has kept room for negotiation with a new proposal. The government has begun working on it, and we also want to play a role.”
Mahmud said entrepreneurs are also engaging with representatives from buyer coalitions to coordinate efforts.
[Additional reporting done by Abu Taleb]
