Fears of a major setback in the garment sector

The US tariff rate on Bangladeshi goods, which used to be 15 percent, has now more than doubled. US President Donald Trump's announcement of new tariffs on goods from more than 100 countries around the world means that Bangladeshi exports will face a 37 percent additional tariff when they enter the United States. The imposition of new supplementary duties has raised concerns that Bangladesh's ready-made garment sector could suffer a major blow. The United States is the largest market for Bangladeshi ready-made garments. Bangladesh exported about $8.4 billion worth of goods to the United States in 2024, of which $7.34 billion was ready-made garments. President Trump announced the new additional tariffs at a press conference at the White House after 2 am on Wednesday, Bangladesh time. He described the day as the United States' "Economic Freedom Day."

In his words, the United States has been waiting for this day for a long time. The White House list says that Bangladesh imposes tariffs of up to 74 percent on US goods. In response, a 37 percent 'reduced supplementary tariff' will be imposed on Bangladeshi goods entering the US market from now on. Trump has announced a 26 percent tariff on Indian goods, which is lower than competing countries like Bangladesh or Vietnam. A 46 percent tariff has been announced on Vietnamese goods. Cambodian goods are subject to 49 percent tariffs, Sri Lankan goods to 44 percent, Pakistani goods to 29 percent and Myanmar goods to 44 percent tariffs. Reuters writes that this will give Indian apparel products a comparative advantage in the US market. The White House list calls for a 34 percent tariff on Chinese products and a 20 percent tariff on European Union products. The Trump administration says the new US move is aimed at countering the so-called 'unfair trade practices' of countries that have imposed high tariffs on US exports. Under the new policy, the US will initially impose a 10 percent tariff on all imports, called a baseline tariff, and higher additional tariffs will apply to countries that the White House calls "manipulating" the value of the dollar and imposing protective tariffs and non-tariff barriers. The White House has presented the new tariff structure as a "long-awaited amendment" that it says is needed to "fix decades of one-sided trade relations." But economists have criticized Trump's policy, saying other countries will retaliate, risking a new trade war. Trump's tariffs will add new pressure to a fragile global economy. The government should quickly engage in bilateral talks. The country's garment sector will face a major risk due to the US tariff on Bangladesh. When the US was imposing tariffs on other countries, I thought that Bangladesh would be able to take great advantage in the export sector if it were exempt from the tariff. But now that the 37 percent tariff has been imposed on Bangladesh, this advantage could no longer be utilized. Imposing higher tariffs on Bangladesh than on China, India, and Pakistan is basically the Trump administration's counter-tariff policy. Bangladesh has to pay higher tariffs on US goods exported to Bangladesh than on China, India, and Pakistan. Accordingly, Bangladesh has faced a 50 percent counter-tariff. This has made Bangladesh's position vulnerable compared to other countries. The United States imposes a 74% tariff on exports to Bangladesh. Since Bangladesh does not import essential goods from the United States on a large scale, it can reduce this tariff to a tolerable level if it wishes. In this case, there is no alternative to bilateral negotiations. After the LDC graduation, such tariffs will further affect Bangladesh. The government should enter into bilateral talks with the United States as soon as possible. Bangladesh exports a large portion of its garments to the United States, especially by importing yarn from the United States and making garments. Both countries' interests are involved here. If these interests are reconciled, the Trump administration can also lift the tariffs imposed on Bangladesh. We must find a way to transform the challenges of duty into opportunities.

The duty tariffs imposed internationally by the Trump administration have created a challenge for Bangladesh's garment sector. This challenge has not only affected the garment sector but also all types of products exported from Bangladesh to the United States. An additional 37 percent duty will be added to the duty currently in effect in America. As a result, the price of goods in that country will definitely increase and sales will also decrease. Since different rates of duty have been imposed for different countries, some countries will benefit while the challenges will increase for some countries. For example, even if Bangladesh's duty increases, this challenge will be greater for Bangladesh's competitors, China, Vietnam and Sri Lanka. Some purchase orders from these countries may come to Bangladesh. Again, in India and Indonesia, but the duty tariff has increased less. As a result, they will get some benefits. India is already much ahead of us in the textile sector. They were also planning to increase their business by investing in the ready-made garments sector. Now that opportunity has increased for them. There is a lot of potential for business to move from Bangladesh to India. Currently, the exports from Bangladesh in the ready-made garment sector are mainly for the middle and lower middle class of America. Now, when the prices of goods in America increase due to duties, the pressure on that class of people will increase. They may reduce their purchases of clothing products. In addition, American buyers will want to impose the pressure of this 37 percent duty on Bangladeshi factories. We have always been behind in negotiations. Now, to what extent this pressure can be mediated through negotiations will also be a challenge. What we need to do now is to continue working with buyers to bring orders from countries like China, Vietnam, and Sri Lanka to Bangladesh. In addition, the government should continue to try to reduce this duty through rapid government-to-government negotiations through diplomatic skills. The Chief Advisor and Press Secretary have already made statements on this issue. They are researching the issue. Our garment sector stakeholders have also expressed concern about this and have started looking for ways to survive in this sector. Now, very few products are imported from America to Bangladesh compared to our exports. So to encourage America, the import of some American products can be increased, which has already started. For example, recently a government agreement was reached with America on LNG import. Through this, perhaps we can also take some advantage in exporting garment products through diplomatic negotiations. In this case, we need to see to it that the products we import are those that we need and that do not increase the price in the market. Similarly, we have to import a lot of machinery. If we import machinery products from America and in return, if we can increase the export of garment products and reduce the duty through negotiations, then we will have a little chance of profiting. The issue of negotiations is coming up again and again because the Trump administration itself has said that this duty is negotiable. Along with this, we need to explain that we are trying to achieve the SDGs, so it would not be right to impose the burden of duty on us right now. We also need to explain that we are very advanced in the garment sector. It can be explained that we have provided employment to a large part of women in Bangladesh. We need to utilize these opportunities. We can get help from America in the energy sector. We can encourage them to invest in Bangladesh and give them an opportunity. Then maybe we can overcome the burden of this duty to a large extent.

The government needs to take action now by holding a meeting with all stakeholders to see how this challenge can be converted into an opportunity. The RMG sector alone cannot handle this. Since there is an opportunity to reduce the duty through government-to-government discussions, the Bangladesh government has to play a major role. Urgent discussions with the US on tariff reassessment are needed The tariff structure that is being seen puts Bangladesh at a comparative advantage over other countries like Turkey, India, and Pakistan, because their products have lower tariffs than Bangladesh. As a result, we will now face pressure from US buyers on product prices. The prices of Bangladeshi products will decrease. Competition will become more intense; which could destabilize the industry in the future. We cannot meet the challenge of the rate at which tariffs have increased alone. Entrepreneurs, governments, buyers, and international labor organizations must work together to meet this challenge. For this, we must urgently discuss with the US administration ways to re-set tariffs. We manufacture 70 percent of our cotton-based products for the US market.

It is not possible to remove them overnight. The concern is that the tariffs in India and Pakistan have increased less than ours. They also manufacture cotton-based products. Again, the raw materials for these products also come from them. As a result, they will do well. If we can reduce domestic costs, then capacity will increase. All in all, a big challenge awaits us ahead.