[🇧🇩] Trump's Victory/Tariff/ Bangladesh

[Saif]

Donald Trump is using tariff as a weapon of choice

Upending text book theories on tariff, President Donald Trump is using tariff as a weapon of choice for multiple objectives. This has made the existing rule-based global trading system go haywire, making the predictable and transparent multilateral trading system put in place by Uruguay Round of tr

thefinancialexpress.com.bd

Donald Trump is using tariff as a weapon of choice

Hasnat Abdul Hye
Published :
Aug 10, 2025 22:38
Updated :
Aug 10, 2025 22:41

Upending text book theories on tariff, President Donald Trump is using tariff as a weapon of choice for multiple objectives. This has made the existing rule-based global trading system go haywire, making the predictable and transparent multilateral trading system put in place by Uruguay Round of trade negotiations and since 1995 by the World Trading Organization (WTO), irrelevant.

Traditionally, tariffs have been slapped by countries to shield domestic industries and to raise revenue. An extension of the former has been the 'infant industry' argument given by newly industrialising countries. Tariffs have been imposed by countries in retaliation of higher rates of tariff by other countries enjoying lower rates from it. President Trump has unleashed a tariff war during his second term with political objectives in addition to the traditional objectives which makes tariff a weapon of choice on multiple fronts. This makes tariff no less lethal than other weapons of mass destruction. The fact that president Trump is using it against all countries, friend or foe, makes this disastrous for the global trading system and the global economy.

The International Monetary Fund (IMF) has already forecast a slower growth rate for world economy in the coming years because of uncertainty about the global trade volume resulting from unpredictable tariff regime of America, the largest economy in the world. In April this year, IMF in its Update on Global Economy reduced the rate of growth by as high as 0.5 per cent and forecast the growth for 2025 at 2.8 per cent. The percentage for 2026 has been placed at 3 per cent after reducing 0.3 per cent. The IMF squarely held the turmoil in global trade resulting from tit-for-tat tariff imposition responsible for this anaemic growth of the world economy.

It is understandable that facing a trade deficit of $1.3 trillion America under president Trump would like to reduce the deficit. In achieving this the Trump administration had theoretically two options: (a) to ask its trading partners to buy more from it; (b) to reduce imports from other countries through quantitative restrictions or slapping high tariff rates that would result in reduced imports. Given the higher prices of American goods the first option was a non-starter through the market mechanism. Faced with this reality, the Trump Administration settled for the second option. But instead of gradual increase in existing tariff, very high rates were announced that shocked the trading partners. Effective on April 1, 2025, the so called 'liberation day' of America, all countries faced a base tariff rate of 10 per cent, on top of which was imposed what was called 'reciprocal' tariff rates that varied among countries depending on their tariff rates for American goods. Then a period of three months, ending on July 31, was announced as 'pause' for bilateral negotiations to reach trade deals. Some countries like Japan 'successfully' completed bi-lateral negotiation and America agreed to a reciprocal tariff rate of 15 per cent on automobiles and parts, down from 25 per cent imposed earlier. But steel and aluminium are excluded from this and still face 50 per cent tariff. In addition, Japan has to make investments in selected sectors, amounting to $550 billion in America over the near future. Furthermore, Japan has to buy American agricultural and defence items in greater volume than now. Under the negotiated deal, Japan has to buy 100 Boeing aircrafts and jointly invest in Alaska LNG development.

The concessions extracted from Japan in lieu of reducing the earlier tariff rate of 25 per cent to 15 per cent reveal the broad objectives of the strategy in trade negotiations that have been conducted by Trump Administration. It is not simply arm twisting, but downright economic blackmailing. It may be asked why countries like Japan could not refuse to agree to such coercive methods and harsh terms? The answer is, having become dependent on the big American market for vital exports like automobiles and auto parts it is difficult for the country to wean itself away from that market all on a sudden. Even with time, it may be impossible to replace American market for certain export items by another market because of its size. Japan is not an exception. Many other countries suffer from this problem of integration to American market and Trump Administration is taking full advantage of this to extract maximum concessions from its trading partners. This explains why Bangladesh had to agree to purchase 35 Boeing aircraft and buy other items even if at higher prices than in the international market. Without the big American market, Bangladesh's garment industry will suffer such a setback that will be impossible to recover from. All countries trading with America have this disadvantage and America is exploiting this to the hilt.

The rest of the world is going to reward America with higher imports and for some countries, higher off-shore investment, under duress lest its big market is lost. In the process the trading partners will be importing inflation from America through payment of higher prices for American goods and services. American manufactures lost the world market for many goods because of higher cost of production, resulting from higher wages and salaries. Now America has found a way out to overcome that disadvantage by weaponising tariff. After the disastrous use of tariff in the Great Depression years of the '30s many thought that tariff had lost its cachet as an instrument of macroeconomic policy. It required a bully like Donald Trump to prove them wrong. The problem is, this tariff regime, with attached coercive measures, may outlive Donald Trump as his successors will be loath to part with a dispensation that makes their life easier and that of their compatriots comfortable.

President Trump must be given the credit for using tariff for reasons other than economic, making it a weapon of multiple uses. His tariff policy has targeted Brazil for 50 per cent tariff for putting his friend, the former Brazilian president Bolsenero, in trial. Likewise, he has threatened higher tariff on Canada for its intention to recognise the state of Palestine. Trump's former buddy Narendra Modi has not fared better for buying oil and gas from Russia. India has been slapped with a steep tariff at 50 per cent. In the midst of great uncertainty, one thing is certain: in Economics 101, tariff and trade will not be taught in the good old way. The makeover given to the concept by the current president of America will defy the conventional wisdom in academia.​

 

[Saif]

A turning point for Bangladesh

This is where economic diplomacy comes knocking on the door of the strongman; the recent initiative by the United States (US) to lower tariffs on key Bangladeshi exports is a ringing endorsement of the magic that is possible with good leadership and true negotiating. No usual policy shift by any me

thefinancialexpress.com.bd

A turning point for Bangladesh
US tariff relief, regional lessons, and the diplomacy of Muhammad Yunus

Serajul I Bhuiyan
Published :
Aug 11, 2025 23:18
Updated :
Aug 11, 2025 23:18

This is where economic diplomacy comes knocking on the door of the strongman; the recent initiative by the United States (US) to lower tariffs on key Bangladeshi exports is a ringing endorsement of the magic that is possible with good leadership and true negotiating. No usual policy shift by any measure, this is a watershed moment — a living rebalancing of trade relations between a new South Asian economy and the world’s economic powerhouse. It arrives at a crucial moment when Bangladesh is capitalising on its economic achievement, broadening the base of its export-based economy, and charting a future beyond Least Developed Country (LDC) status.

This achievement — the work of Nobel Laureate and Chief Adviser Dr Muhammad Yunus — is more than a smart business deal. It is a historic shift in Bangladesh’s economic diplomacy towards the world, founded on moral leadership, strategic thinking, and fact-based activism. His leadership awakened Bangladesh’s mission to rally the US as a confident, reform-minded, and forward-looking partner committed to sustainable and inclusive development.

SCOPE AND SIGNIFICANCE OF THE TARIFF CUT: The tariff cut recently negotiated by the United States with Bangladesh is a historical bilateral trade relationship realignment and a strategic and ambitious policy action by the United States Trade Representative (USTR). Targeted at significant Bangladeshi export sectors — such as ready-made garments (RMG), textiles, jute goods, leather products, and some agro-based products — this action is far from mere symbolic goodwill. It offers real, measurable benefits with the potential to initiate export growth, contribute positively to the job situation, and strengthen Bangladesh’s position in international trade.

The treaty possesses several desirable characteristics. Perhaps most significantly, it imposes tariff reductions between 5 per cent and 18 per cent across more than 300 lines of goods, thus improving the price competitiveness of Bangladeshi exports in the US market. The accord also includes the reinstatement and partial reinstatement of Generalised System of Preferences (GSP) privileges, which had been revoked in 2013 due to compliance problems with labour. The reinstatement follows the improvement in labour rights, occupational safety, and sustainability in Bangladesh. Apart from this, the agreement also promises additional incentives to women-owned businesses and green-certified producers, allowing these to have duty-free or significantly reduced access to US markets and thus facilitate Bangladesh’s compliance with inclusive and ethical levels of trade.

The economic implications of such an occurrence would be widespread. Based on the estimates of the Export Promotion Bureau (EPB) and Bangladesh Bank, the tariff cut can bring $2.5 billion to $3.2 billion in extra export earnings in the initial three years. This bonanza will create up to 1.2 million direct jobs, predominantly in the RMG and textile sectors, and another 2 million indirect jobs, predominantly for women workers and the rural population as part of the supply chain system.
Further, the anticipated export earnings’ boost will contribute an additional $3 billion to Bangladesh’s foreign exchange reservoir, thereby strengthening the country’s current account balance, supporting the stability of the Taka, and easing burdens on the import price and public purse. These are well-timed benefits for Bangladesh as it is likely to encounter international economic headwinds, higher energy prices, and the requirement of practicing fiscal discipline during post-pandemic recovery.

Macroeconomically, the change would be likely to contribute 0.4 to 0.6 percentage points to gross domestic product (GDP) growth per year because of enhanced export performance and sectoral spillovers. Besides direct trade effects, the agreement will have positive spillovers in major supporting sectors such as logistics, transportation, ICT services, and finance since increased demand necessitates better infrastructure, digitalisation, and financial services.

REGIONAL COMPARISON: Bangladesh’s success in securing a welcome tariff reduction from the US is in striking contrast to the experience of other players in the region. While other South Asian economies are bogged down in going in circles, diplomacy, or internal politicking, Bangladesh has emerged as a model of purpose, reformist engagement, and normative diplomacy. A closer look at the comparative experience — specifically the experiences of India, Pakistan, Sri Lanka, and Vietnam — shows why Bangladesh succeeded where others have not.

India: Strategic Stalemate in Trade Diplomacy

India, the region’s biggest economy, has had several chronic trade differences with the US mainly because of protectionism, regulatory overhang, and market access barriers. In 2019, the US withdrew India’s GSP status, listing unresolved trade differences on digital services, agriculture, and renewable energy.

Also contributing to tensions are India’s hard-line positions on patent protections of drugs and e-commerce regulations limiting foreign competition, which have heightened tensions with US trade and business officials. Indian exports of textiles, clothing, and footwear now enjoy higher effective tariff rates than Bangladeshi exports following the recent accord. India’s less flexible federal system and lower trade negotiation flexibility have limited its capacity to be accommodating, and Bangladesh has the opportunity to benefit from being a more accommodating and reformist partner.

Pakistan: Security-Oriented, Not Trade-Oriented

During most of its recent history, Pakistan’s relationship with America has been characterised by security and strategic ties, rather than sustained trade and economic restructuring. While these have helped Pakistan to receive preferential treatment in defence, they have not managed to fuel sustainable trade dividends. Sustained economic instability in recent years, combined with swollen debt inventories and fiscal indiscipline, has considerably undermined Pakistan’s bargaining leverage.

Even with Washington lobbying, there has been minimal progress in gaining tariff concessions. This has been added to by IMF-imposed austerity and political crisis, both of which have undermined American stakeholder faith in Pakistan’s business and investment climate. Bangladesh was the contrast — against all change in the political background — making a strong pitch based on economic solidity, good government, and a clear reform vision, gaining credibility where Pakistan fell short.

Sri Lanka: Lost Trade Opportunities during Crisis

Sri Lanka is the story of unfulfilled trade opportunities during an economic and political breakdown. As a plague hit Sri Lanka in the form of a debt-to-GDP ratio of more than 120 per cent, hyperinflation, and a plummeting currency, trade preference losses accelerated with an unprecedented intensity. Disruption of the EU GSP-plus also limited access to huge markets. Simultaneously, the reality that no current trade discussion exists with the United States is a pointer to the absence of a strategic leaning towards economic renaissance via trade diplomacy.

Vietnam: A Role Model and Strategic Parallel

Among the rising economies, Vietnam is a global leader in export-led growth and multilateral trade integration. With 15 Free Trade Agreements (FTAs) under negotiation, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), Vietnam has become a global leader in garment, electronics, and high-value manufacturing.

Two-way commerce between the US and Vietnam totalled more than $120 billion in 2023, evidence of the strength of their trading relationship. Value chain integration, stability of regulation, and neutrality politically are Vietnam’s secrets to success, which instill confidence among foreign investors and trading partners. Where Bangladesh has fallen behind Vietnam in size and integration, it has used a rival comparative advantage — of reducing poverty, empowering women, and enjoying a world reputation for socially responsible and sustainable manufacturing.

To be continued....................​

 

[Saif]

BANGLADESH’S COMPARATIVE ADVANTAGE: The Bangladesh-US bilateral trade encompasses a diverse range of goods and services, driving the industrialisation of Bangladesh, enhancing public health, ensuring food security, facilitating digitalization, and advancing infrastructure development. Imposing these imports — many of which are critical to Bangladesh’s growth horizon — a uniform 20 per cent tariff can lead to broad price hikes, reduced availability, and supply chain collapse. Below is a categorised overview of such strategic imports:

Food and Agricultural Products

Bangladesh relies on US exports to supply its food and agriculture processing industries. To name a few, soybean meal and soybean oil are the linchpin imports for the manufacture of edible oil and animal feed, while cereal grains and wheat are the pillars in food security and the milling sector. Cotton, being the prime raw material of Bangladesh’s RMG sector, is the backbone of textile production. On the other hand, dairy products (i.e., powdered milk, cheese) and US processed food products meet the demands of an emerging urban consumer base.

Industrial Machinery and Equipment

For maintaining competitiveness in the international market, Bangladesh also imports sophisticated industrial machinery from the US, including textile machinery for spinning and dyeing, agro-hardware for intensive agriculture, and food processing factories that facilitate agro-industrial production to be intensified. Packaging, automation, and robotics systems — used in pharmaceuticals, FMCG, and manufacturing — also constitute a key component of this trade flow.

Energy and Chemicals

As the energy demand grows, Bangladesh imports finished petroleum products like aviation fuel and premium lubricants from the US. Liquefied Natural Gas (LNG) is also imported for power production and industrial consumption. Chemical reagents, solvents, and fertilisers, which are crucial in the pharmaceutical, textile, and agricultural industries, are also imported by Bangladesh.

Pharmaceuticals and Medical Devices

Bangladesh imports patented life-saving US drugs, including oncology drugs, biologics, and vaccines, that are not available in Bangladesh. Medical diagnostic supplies, surgical equipment, and hospital-level implants are imported from the US, elevating healthcare capacity and quality of care, especially in cities.

Information and Communication Technology (ICT)

To power its expanding digital economy, Bangladesh depends on US exports of enterprise management software, cloud computing services, cybersecurity solutions, and software licenses. It needs imports of semiconductors, microchips, servers, and telecommunication equipment to support improvement in Bangladesh’s technology infrastructure and innovation environments.

Aerospace and Defence Equipment

For the defence and aviation sector, Bangladesh imports maintenance equipment and aircraft spares for civilian (e.g., Biman Bangladesh Airlines) and military applications. Radar equipment, navigational aids, and secure communication devices are also imported under diplomatic and defence cooperation.

Education and Professional Services

America contributes to Bangladesh’s education and institutional development by exporting consulting services in law, engineering, IT, governance, and STEM lab equipment, educational databases, and digital learning solutions that are crucial for Bangladesh’s universities and research institutions’ building capacity and learning based on innovation.

Luxury and Consumer Goods

Bangladesh’s urban affluent continue to import higher and higher percentages of branded clothing, electronics, and home appliances from US firms. Apple, Dell, HP, Whirlpool brands, and car brands such as Ford, GM, and Tesla products are imported, primarily for the upper middle class, foreign diplomats, and institutional buyers.

To be continued...................​

 

[Saif]

STRATEGIC IMBROGLIO: To begin with, a blanket 20 per cent tariff on all types of US imports can raise the cost of goods and services for Bangladeshi consumers and enterprises. Ranging from farm inputs such as soybean oil and wheat to life-saving medicines and advanced medical equipment, the rising prices that result can disproportionately burden low-income households, health centres, and SMEs relying on these imports as business and competitiveness inputs. It can further slowdown the process of industrial modernisation, especially in sectors such as ICT, agro-processing, and textiles, which depend on the import of US-produced machinery, software, and parts to increase productivity as well as become globally competitive.

Secondly, it can discourage American companies from investing further in Bangladesh, especially regarding joint ventures, technology transfers, and capital investments. Multinational companies aiming to tap Bangladesh’s high-potential renewable energy, aviation, health technology, and digital infrastructure sectors may face high tariffs as an entry risk or a regulatory risk signal. This would reverse the pace of bilateral economic engagement that has picked up momentum since the US tariff relief for Bangladeshi exports.

Lastly, a blanket tariff can trigger a chain reaction of retaliatory or balancing trade measures, especially in sensitive sectors like ready-made garments (RMG), where Bangladesh still lobbies for further tariff concessions if the move is perceived as protectionist or bereft of the principles of reciprocity of trade. Otherwise, it will complicate further or ongoing trade talks with US trade negotiators, possibly undermining some of the goodwill that has been created due to Bangladesh’s demonstrated track record on labour rights, sustainability, and ethical sourcing.

Generally, while the 20 per cent tariff presents apparent difficulties, it also presents an opportunity for strategic rebalancing of trade, but as long as it is done carefully, ahead of negotiations, mutual prosperity, and the eventual promise of keeping Bangladesh on its path towards economic resilience and integration in the global economy.

LEADERSHIP MATTERS: The success of Bangladesh in negotiating tariff reductions from the US cannot be understood without the visionary leadership and revolutionary diplomacy of Nobel Peace Laureate Dr Muhammad Yunus. This achievement — a non-traditional trade adjustment and not a typical negotiating ploy — was facilitated through the acumen of Yunus in redefining the very terms of negotiation, converting what would otherwise have been a technocratic technical dispute into a strategic and ethical discourse on human development, economic equity, and shared global responsibility.

Rather than negotiating the tariff issue like a standard business concern, Yunus redefined trade as a means of social transformation, linking tariff relief to the empowerment of rural Bangladesh women, informal sector workers, and green businesses. His moral voice on the global stage, following decades of poverty struggles and advocating for ethical business practices, opened influential doors in Washington. U.S. senior senators, Congressional caucuses, and influential civil society leaders met the Bangladeshi delegation not only out of a sense of obligation, but also due to a shared admiration for the values for which it stood.

One of the central pillars of Yunus’s strategy was to underscore Bangladesh’s tangible improvements — especially in the wake of the Rana Plaza disaster. The mission was proud to point out the country’s remarkable advances in factory safety, workers’ rights, and environmental stewardship, citing its global leadership in green-certified garment factories. Fact, case studies, and third-party audits were deployed to support these assertions, further positioning Bangladesh as a reliable and forward-thinking trade partner.

Additionally, Yunus made shrewd forays into powerful U.S. policy constituencies beyond traditional diplomacy. Think tanks such as the Center for Strategic and International Studies (CSIS) and the Council on Foreign Relations (CFR) were brought on board to amplify Bangladesh’s voice in Washington think tanks, the media, and academia. These platforms facilitated perceptions to shift and the tariff question to be presented as one of moral global commerce and broad-based development, rather than a bilateral policy anomaly.

The bargaining effort wasn’t the work of one man — it was an integrated, multidisciplinary undertaking, coordinated with unusual clarity and purpose. Yunus was the leader of a competent and diverse negotiating team that comprised industry titans, seasoned trade attorneys, labour union organisers, and development economists. They spoke with one voice, articulating a national interest agenda that cut across bureaucratic silos and institutional turf wars.

Exports, Diversification, Value Addition, FDI: US tariff concession is a powerful incentive for export diversification and value addition in the Bangladesh economy. It offers a vital window of opportunity for the country to move away from the low-value garment production to higher margin, design-based, technologically advanced ready-made garment (RMG) products. This movement not only raises incomes per unit exported but positions Bangladesh in high-value world apparel markets.

Apart from this, the improved trading climate encourages the growth of sunrise industries such as agro-processing, light engineering, leather goods, ICT hardware, and pharmaceuticals. These industries, being promising but underdeveloped due to tariff protection and reduced international exposure, are now poised to link up with global value chains. The tariff incentives also encourage the formalisation of small and medium-sized firms (SMEs) because they lower the transaction costs in trade and promote conformity with international standards. Through formalization, SMEs get access to finance, technology partnerships, and new markets.

Tariff reductions are also clear evidence of trade stability, which will again position Bangladesh as a stable and competitive source of foreign direct investment (FDI). American companies, in fact, now have their sights set on joint ventures, subcontracting, and strategic alliances in Bangladesh’s Export Processing Zones (EPZs) and newly developed high-tech industrial parks.

Secondly, this amiable trade regime adds to the attraction of Bangladesh in the reshoring and supply chain diversification agenda at the international level. Under conditions of geopolitical instability and rising production costs in East Asia, especially China, multinational corporations are actively seeking new bases of production. Bangladesh, through this new US trade policy framework, now has a compelling value proposition of cost-competitiveness, human resources, and a reformist policy regime.

Labour Market and Rural Development: The benefits of this trade breakthrough extend far into the country’s job market, particularly in the RMG industry, which has employed millions of workers — many of whom are women. Improving market access and export will lead to better job quality, wage dynamics, and labor safety standards, further solidifying the sector as a force behind social mobility and women’s empowerment.

Furthermore, the new trade pact expands rural cooperatives’ and women’s businesses’ access to export, supported by digital platforms, e-commerce, and micro-manufacturing networks. Such an opening provides room for inclusive growth as well as pulls marginalized communities into the international economy, bridging the rural-urban divide.

Macroeconomic Stability: At the macro level, exports to the US will substantially boost foreign exchange revenues, which is imperative to stabilise the Bangladeshi Taka during high import prices and external debt repayment. With diversified export revenues on the rise, the country’s foreign exchange reserves will increase, hence boosting its overall fiscal resilience.

These inflows also relieve balance of payments pressure, allowing Bangladesh to become less dependent on remittances and concessional borrowing as foreign buffer sources against shocks. This, in turn, enhances economic sovereignty, lessens fiscal vulnerability, and allows the government to spend on long-run development with less dependency and greater confidence.

In short, the US tariff reduction is more than a trade win. More precisely, it is a strategic shift of structural clout toward fundamental structural change, releasing diversified growth, investment, inclusive jobs, and sustained macroeconomic stability.

RECOMMENDATION: To develop a healthy and future-oriented trade relationship with the United States, Bangladesh must pursue a proactive and strategy-based approach. Rather than viewing tariffs as fixed obstacles, Bangladesh must employ diplomatic means and economic diplomacy to redefine trade relationships in a manner that supports bilateral growth, stability, and innovation. The following policy directions are proposed to enable balanced, equitable, and future-oriented trade relationships:

Pursue Tariff Reductions on Strategic Imports

Bangladesh must initiate sectoral negotiations with US trade negotiators to reduce or eliminate tariffs on critical imports of the highest priority for Bangladesh’s industrial and social development. They include strategic imports such as cotton for the RMG sector, textile and food processing machinery, up-to-tech medical equipment, and pharmaceuticals. These are not luxury items but production enablers that facilitate employment, export earnings, and public health returns. Negotiation of tariff concessions on these inputs would lead to cost-effective production, price competitiveness, and improved service delivery directly.

Demand Inclusive Bilateral Trade Negotiations

Bangladesh must take its engagement with US trade and commerce representatives to the next level by insisting on systematic, regular bilateral trade negotiations. These sessions should focus on principles of reciprocity, sectoral exemption from tariffs, and predictable regulatory regimes. Through the provision of the Trade and Investment Framework Agreement (TIFA) or its equivalent, Bangladesh can institutionalize debate on the facilitation of trade, harmonization of standards, and resolution of conflicts. Additionally, joint economic councils or chambers of commerce should be added to continue encouraging private-sector involvement and confidence-building for American investors.

Encourage Technology Transfer and Co-Production Agreements

One of the most visionary measures Bangladesh can take is to accord the most significant priority to technology transfer and co-production agreements in high-impact sectors such as Information and Communication Technology (ICT), renewable energy, pharmaceuticals, and air transport. These partnerships reduce long-term dependence on imports as well as stimulate capacity building, employment creation, and innovation cultures. Bangladesh is poised to provide incentives — preferential land in SEZs, tax holidays, or intellectual property rights — to US firms willing to invest in local manufacturing, R&D, and training initiatives.

By interweaving these approaches — selective tariff talks, institutionalised trade dialogue, and strategic joint ventures — Bangladesh may safeguard its economic interests without compromising its commitment to fair, inclusive, and rules-based global commerce. These recommendations are framed to assist in ensuring that the partnership between Bangladesh and the United States continues to expand not only as a transactional relation but as a mutually enhancing, innovation-based partnership rooted in long-term development interests and shared prosperity.

Dr Serajul I Bhuiyan is Professor and Former Chair Department of Journalism and Mass Communications Savannah State University.​

 

[Saif]

How US cotton can help BD apparel survive Trump's tariff better

In response to the US reciprocal tariff now cut to 20 per cent, Bangladesh's textile and spinning millers are set to significantly increase American cotton imports. The move comes under a trade-off arrangement designed to make the country's apparel exports more competitive in the US market. Under

thefinancialexpress.com.bd

How US cotton can help BD apparel survive Trump's tariff better

Wasi Ahmed
Published :
Aug 12, 2025 22:58
Updated :
Aug 13, 2025 00:05

A denim producing factory in Bangladesh — Photo courtesy: hameemdenim.com

In response to the US reciprocal tariff now cut to 20 per cent, Bangladesh's textile and spinning millers are set to significantly increase American cotton imports. The move comes under a trade-off arrangement designed to make the country's apparel exports more competitive in the US market.

Under the latest US Presidential actions, export goods entering the American market must use at least 20 per cent of the customs value of the product in US-origin content to qualify for partial duty exemptions under US Customs and Border Protection (CBP) provisions. In practice, this means that at least one-fifth of a product's value must come from US sources to receive preferential treatment. The tariff reduction applies only to the US-origin portion, while the non-US portion remains subject to the standard tariff.

To illustrate, US customs will apply the tariff only on the non-American share of a product's value, provided the 20 per cent US-content threshold is met. For example, a T-shirt valued at $10 with 20 per cent US-origin content would face a tariff of $1.60 instead of $2. The 20 per cent tariff rate -- applicable to Bangladesh -- would be calculated solely on the $8 non-US portion.

Speaking at a press briefing, the President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said the measure presents a unique opportunity to reduce export costs and strengthen Bangladesh's position in the American market. The US Customs and Border Protection (CBP) will have authority to verify compliance, requiring importers to provide documentation on the proportion and value of US-origin materials. This verification aims to ensure only eligible products enjoy reduced duties.

Industry insiders say the new condition will drive an increase in US cotton imports, potentially doubling current volumes by year-end. A practical example comes from denim trousers with an FOB (Free On Board) value of around $8, where the fabric component accounts for roughly $4.125. Of this, cotton makes up about 33.25 per cent -- comfortably above the required threshold. Even in cases of lower-value brands, such as Kontoor, the cotton content typically remains high enough to qualify.

The owner of a large apparel company noted that his facilities produce around 54 million yards of denim annually, with 60 per cent destined for the US market. The company imports 24,000 tonnes of cotton each year, of which only 15 per cent currently comes from the US. Plans are now in place to increase the share of US cotton imports by nearly 60 per cent to capitalise on the tariff advantage.

A former BGMEA president added that the requirement for US raw materials, alongside local value addition, could spur investment in Bangladesh's spinning and textile mills, thereby generating new employment opportunities.

While US cotton is generally more expensive than cotton from other countries, exporters have little choice but to adopt it when targeting the US market. Industry stakeholders expect US brands and retailers to demand US-origin cotton in their orders to benefit from the tariff concessions, making the sourcing decision less about preference and more about market access.

Currently, Bangladesh imports over $4 billion worth of cotton annually, including around $500 million from the US. Domestic production falls far short of demand, forcing manufacturers to rely heavily on imports -- a situation that naturally supports a pivot toward US cotton for garments bound for America. Some factories already use as much as 40 per cent US-origin material, meaning the 20 per cent tariff would apply to only 60 per cent of the product's value, lowering overall duty costs even further.

According to the US Department of Agriculture (USDA), Bangladesh is projected to remain the world's largest cotton importer in 2025-26, with imports expected to reach 8.5 million bales. The USDA also forecasts a modest recovery in global cotton consumption, set to hit a five-year high of 118.1 million bales, driven largely by strong demand in textile-exporting countries such as Bangladesh and Vietnam. Global cotton trade is expected to rise by 2.3 million bales to 44.8 million bales in 2026, signalling a broad-based recovery in textile production.

To support this momentum, the Bangladesh government is finalising a dedicated bonded warehouse facility to ensure duty-free access for US cotton. Chief Adviser Muhammad Yunus has also written to the US President, pledging a substantial increase in US farm imports -- particularly cotton -- as part of a broader trade diplomacy effort to reduce bilateral trade imbalances.

As part of this strategy, Bangladesh is drafting a roadmap to double US cotton imports by 2028, targeting a 25 per cent share of total cotton supply from American growers. Based on 2024 projections, imports from the US are set to grow from 1.0 million bales in 2025 to 2.1 million bales by 2028. The US share of Bangladesh's cotton imports will climb from 12 per cent to 25 per cent over that period, with the import value nearly doubling from $473.8 million to $987.04 million.

This shift aligns with Bangladesh's recent strong export performance. Garment export from the country surged 13.79 per cent year-on-year to $7.55 billion in FY2024-25, according to the Export Promotion Bureau (EPB). Maintaining this momentum will require strategic adaptation to new trade conditions, including compliance with US content requirements.

Although initial concerns were raised about the implications of the new tariff structure, the outlook appears positive than many anticipated. However, clarification as to the extent of duty waiver will make things easier to grasp. The coming months will determine how well exporters adapt to the evolving trade regime and whether this policy shift translates into sustained market gains.​

 

[Saif]

The new tariff order: how poor countries got played

The Trump administration’s sweeping tariff overhaul flipped decades of Untied States (US) trade policy. Tariffs—once a shield for domestic industries—were recast as instruments of pressure and punishment. While headlines focused on battles with China and the European Union, the bi

thefinancialexpress.com.bd

The new tariff order: how poor countries got played

MG Quibria
Published :
Aug 14, 2025 23:44
Updated :
Aug 14, 2025 23:44

The Trump administration’s sweeping tariff overhaul flipped decades of Untied States (US) trade policy. Tariffs—once a shield for domestic industries—were recast as instruments of pressure and punishment. While headlines focused on battles with China and the European Union, the bigger losers were poorer nations with the least power to fight back.

At the heart of the strategy was a “reciprocal tariff” formula: divide the US trade deficit with a country by that country’s exports to the US, halve the result, and set a 10 per cent minimum. It was simple arithmetic with skewed consequences. Smaller economies with narrow export bases were hit hardest: Cambodia 49 per cent, Laos 48 per cent, Madagascar 47 per cent, Vietnam 46 per cent, Sri Lanka 44 per cent, and Bangladesh 37 per cent. By contrast, the European Union (EU) paid 20 per cent, Israel 17 per cent, and Australia and the United Kingdom (UK) just 10 per cent.

For Bangladesh—where more than 80 per cent of exports to the US are garments—the blow was severe. Apparel tariffs, once around 15–16 per cent, were slated to rise to 37 per cent, pushing the duty on a $10 polo shirt from $1.60 to over $5, effectively pricing Bangladeshi goods out of the market. Nor did Bangladesh enjoy any preferential access: it had been excluded from the US Generalised System of Preferences (GSP) in 2013 over labor issues, the program ended for other developing countries in 2020, and in any case, US GSP law (USC 2463) excluded most textile and apparel products as “import sensitive.”

The US trade team driving this policy—Trade Representative Jamieson Greer, Treasury Secretary Scott Bessent, and Commerce Secretary Howard Lutnick—pushed for rapid bilateral deals under tight deadlines. Greer’s playbook was blunt: open with extreme demands, sidestep WTO channels to block coalitions, and link tariff relief to unrelated concessions in areas like intellectual property or agriculture where richer countries had leverage.

One tactic was particularly effective: non-disclosure agreements (NDAs). Several delegations, including Bangladesh’s, were required to sign NDAs covering all negotiation details. This enforced secrecy and isolated countries from one another, preventing them from sharing strategies or mobilising industry support. Wealthier nations sometimes refused; poorer ones, fearing exclusion from talks, often complied.

Bangladesh’s delegation was disadvantaged from the outset. Without authority to bargain across policy domains, they could only plead humanitarian and developmental cases. Their approach was reactive, shaped by US proposals rather than their own agenda. Lacking technical capacity to challenge US calculations, and barred from coordinating with fellow garment exporters, they faced Washington alone.

The final deal brought the tariff down to 20 per cent —still a third higher than before—but at a steep price. Bangladesh agreed to significantly expand imports of specific American goods, including large volumes of wheat, cotton, soybeans, dairy, meat, poultry, liquefied natural gas, and 25 Boeing aircraft, while also opening its markets more broadly to US agricultural and energy products.

The Boeing purchase provided an almost comic subplot. Bangladesh’s order was part of a global buying spree: Indonesia 50, Cambodia 20, Bahrain 12, Saudi Arabia 20 (plus 10 on option), Japan 100, and Qatar an eye-popping 260. If even half these orders materialize, they could help revive Boeing’s accident-prone fortunes, turning trade diplomacy into an informal corporate rescue plan.

For Bangladesh, the economic consequences were swift: US garment orders fell, manufacturers absorbed higher costs on razor-thin margins, and competition from free-trade partners intensified.

The inequity was glaring. The poorest nations, with the least diversified economies and weakest safety nets, bore the steepest hikes. Wealthier partners, with greater bargaining power, secured lighter terms. The logic was cold but seemed clear: squeeze those least able to retaliate while accommodating those who could hurt you.

Two major economies, however, were punished for politics rather than economics. India faced a 50 per cent tariff—25 per cent under the reciprocal formula and another 25 per cent penalty for continuing to buy Russian oil, a move opposed by Washington. Brazil also faced a 50 per cent tariff—10 per cent base plus a 40 per cent ad valorem rate—explicitly tied to its prosecution of former president Jair Bolsonaro, whom Trump called a victim of a “witch hunt.” The White House accused Brazil’s judiciary of political persecution and censorship, framing the tariff as a defense of U.S. business and free speech.

For Bangladesh and other developing economies, the lessons are sobering. Diversify exports and markets to reduce reliance on a single product or buyer. Build technical expertise in trade law, economics, and negotiation strategy. Engage early, before the stronger party defines all the terms. And even under NDA constraints, seek discreet channels to coordinate with similarly affected nations.

The new tariff order is a blunt reminder that in trade diplomacy, the rules may be multilateral—but outcomes are dictated by raw power. Appeals to fairness or development rarely prevail. Without leverage, preparation, and alliances, poorer nations will continue to be outmaneuvered—and forced to pay the highest price.


Dr MG Quibria is a development economist and former Senior Advisor at the Asian Development Bank Institute.​