The US Trade Representative and Bangladeshi Commerce Advisor are negotiating a trade deal amid growing concern over impact of President Donald Trump‘s proposed 35% tariff on Bangladeshi imports from August 1.
Bangladesh is a major garment exporter, and the sector makes up 80 percent of the country’s total exports.
While announcing the tariffs, President Trump left room negotiations. In a letter addressed to the head of the interim government Dr. Muhammad Yunus, the U.S. president wrote, “these tariffs may be modified, upward or downward, depending on our relationship with your country.”
Commerce Adviser Sheikh Bashir Uddin is in Washington holding talks to reach a deal before August 1 deadline for the new tariffs.
Bangladesh’s garment industry is a key area of the economy, with companies employing 4 million workers and contributing roughly 10% to Dhaka’s annual GDP.
US trade tariffs to revert to April levels if countries don’t conclude a deal by August 1
If the two countries are unable to strike a deal in time, the South Asian country faces the prospect of export orders from the United States due to high prices and job losses at home.
In April, Nobel laureate economist Paul Krugman warned against imposing high tariffs on clothing imports from Bangladesh.
“Putting high tariffs on imports of clothing from Bangladesh is exactly what you shouldn’t be doing,” he told The New York Times.
“That’s the kind of thing that is disruptive, raises the cost of living for American consumers, does nothing to make us more secure,” economist added.
Meanwhile, Finance Adviser to the government, Salehuddin Ahmed said Dhaka expects to reconcile trade matters and the final tariffs would be fixed in negotiations with the USTR in Washington D.C.
As part of efforts to protect trade interest in the existing US market, Dhaka is considering making concessions to the United States.
“We need to agree to some concession,” Commerce Secretary Mahbubur Rahmane said.
He referred plans to buy Boeing aircraft and prioritizing food grains purchase from the United States.
For American retailers, the new tariff regime presents a stark dilemma: absorb steep cost increases or pass them along to consumers already weary of inflation.
Companies such as Gap Inc., Walmart, and VF Corporation import significant volumes of garments from Bangladeshi factories known for producing budget-friendly T-shirts, denim, and sportswear.
Experts say the sweeping new U.S. tariffs on apparel imports from Bangladesh could even reshape global supply chains and translated into higher prices on American store shelves.
Since the 1980s, Bangladesh has leveraged preferential trade programs—first under the Generalized System of Preferences (GSP), then through Most Favored Nation (MFN) status—to grow its garment industry into one of the world’s largest.
Most of the employees in the garment factories are women. The garment companies generate over $47 billion in export earnings annually.
While Bangladesh lost GSP benefits for apparel in 2013 over labor rights concerns, the country still enjoyed relatively moderate tariffs compared to higher-risk markets.
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