The US on Thursday decided to impose a 20% tariff on Bangladeshi products, which was a significant relief for Bangladesh, as it was fearing an imposition of a 35% duty.
The Trump administration's decision came right after the third round of US-Bangladesh trade talks.
Why it matters
- It brings relief to Bangladeshi exporters, especially in major export sectors like ready-made garments.
- Bangladesh is currently the third largest garment exporter to the US, with a 9.3% share of the US apparel market.
- The US is Bangladesh's single-largest export destination, and apparel exports make up around 80% of Bangladesh's export earnings.
Zoom out
- On April 2, 2025, US President Donald Trump abruptly announced the unilateral imposition of higher tariffs on imports from 150 countries under a new "Reciprocal Tariff" policy.
- White House set tariffs on Bangladeshi products as high as 37%, a sharp increase from the previous average US tariff rate of just 15.3% on Bangladeshi exports.
- On the same day, an executive order issued from the White House set tariffs on Bangladeshi products as high as 37%, a sharp increase from the previous average US tariff rate of just 15.3% on Bangladeshi exports.
- Although the United States had planned to implement this new tariff policy starting April 9, it was postponed for three months, until July 9, due to objections from several countries, including Bangladesh.
- During this period, the tariff structure was kept open for possible revisions.
- on June 28, it was announced that the tariff rate would be reduced to 35% based on the outcome of the talks and that it would take effect from August 1.
- The interim government held three consecutive rounds of talks with relevant US authorities – on July 3 in Washington DC, on July 17 in New York, and finally on July 30 and 31 in Washington DC.
- The US signed tariff agreements with the United Kingdom on May 8, Vietnam on July 2, Indonesia on July 15, the Philippines on July 22, Japan on July 23, the European Union on July 27, and South Korea on July 31.
Zoom in
- While Thursday's tariff announcement actually increases US tariff on Bangladeshi goods from an average of 15.3% to 20%, similar rates on Bangladesh's RMG export competitors – chiefly Vietnam, India and China – means Bangladesh's prospects remain largely unchanged.
- Currently, the US has imposed a 30% tariff on China, while China has set a 10% tariff on US goods. However, the tariff suspension between the two countries is still ongoing. More on that later…
- The tariff on Vietnamese exports was reduced from an initial 46% to 20%, the same as Bangladesh. However, if China tries to reroute their goods through Vietnam, those would face a 40% tariff.
- In the case of India, the tariff was reduced from 26% to 25%. However, a "punitive tax" has been threatened due to India's purchases of weapons and energy from Russia.
But…
- While this decision is reassuring, stakeholders say uncertainty in global trade flows remains, particularly due to unresolved issues in US-China relations and the overall reciprocal tariff framework.
- China is the world's largest apparel exporter, so the fate of their tariff equation with the US will have an impact on how other producers fare.
- Top officials from the US and China failed to agree on extending a 90-day pause on tariffs on Tuesday during the latest round of talks held in Stockholm, Sweden, reports Al Jazeera.
- Any renewal of the pause, which is due to expire on August 12, will ultimately be up to Trump, US Treasury Secretary Scott Bessent said.
What they are saying
- "The reduction in US tariffs is a big relief for Bangladesh. Many of Bangladesh's competitors in the international market face higher tariffs than Bangladesh, which will help Bangladesh strengthen its position in the global market. However, the global trade environment is still uncertain. Particularly, the tariff rate on China remains unresolved, which will significantly impact trade flows in the entire region. If relations between China and the U.S. do not improve, new opportunities might arise for export-oriented countries like Bangladesh in the U.S. market. On the other hand, if China receives more favourable tariffs, competition will intensify." Economics Professor Muhammad Shahdat Hossain Siddiquee, Dhaka University, told Stream.
- "The previous high tariffs created significant uncertainty in our business, with many orders being cancelled or reduced. This harmed workers, who were afraid of losing their jobs. Now, with the reduction in tariffs, we have some relief, but the market situation is still not stable." Mohammad Abdullah, a garment factory owner, told Stream
- "Bangladesh secured a 20% tariff rate—comparable to its key apparel-sector competitors such as Sri Lanka, Vietnam, Pakistan, and Indonesia, which received rates between 19% and 20%. As a result, Bangladesh's relative competitiveness in apparel exports remains unaffected. By contrast, India received a 25% tariff after failing to reach a comprehensive agreement with the US," said a press statement posted on Chief Adviser Muhammad Yunus's social media
- "We negotiated carefully to ensure that our commitments aligned with our national interests and capacity. Protecting our apparel industry was a top priority, but we also focused our purchase commitments on U.S. agricultural products. This supports our food security goals and fosters goodwill with US farming states," said Khalilur Rahman, national security adviser and lead negotiator for Bangladesh in the tariff talks.
Big picture
With the new tariff rates taking effect, Bangladesh's export sector can breathe a temporary sigh of relief. However, the global trade environment remains volatile. The outcome of US-China negotiations, the final form of the reciprocal tariff structure, and the positions of other competing countries, everything remain in flux. Therefore, maintaining diplomatic activity and diversifying export products has become essential. To remain competitive in the international market, Bangladesh must focus not only on tariff advantages but also on long-term strategic preparedness.
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