As Vietnam gains ground, Bangladesh stagnates in race for US market

A newly announced trade deal between the United States and Vietnam has raised serious concerns within Bangladesh's apparel industry, as local exporters fear they could lose ground in the crucial US market unless the nation moves quickly to secure a deal of its own. 

The agreement negotiated by Vietnam following weeks of intense diplomacy, will allow the Southeast Asian nation's exports into the US at a 20% tariff.

This represents a sharp decrease from the 46% levy announced by US President Donald Trump in April during the Liberation Day celebrations in early April. 

The reason this news has set alarm bells ringing is the fact that Vietnam's deal comes against the backdrop of Bangladesh's struggle to secure a favourable agreement of its own, which would mean that the country may face a 37% levy on goods shipped to its single-biggest export destination.

As such, it has placed Bangladesh's negotiating pace and policy direction under sharp scrutiny, especially as the clock ticks down on Trump's 90-day temporary reprieve.

Trade analysts warn that unless Bangladesh moves swiftly to finalise its own deal with Washington, it risks a gradual erosion of its export competitiveness – especially in the $500 billion global garment industry.

"If we don't move fast, we will not be able to save the day," said Rubana Huq, a former president of the Bangladesh Garment and Apparel Manufacturers Association (BGMEA). 

"This is not just about tariffs – it's about how prepared we are to climb up the value chain."

A brewing threat to Bangladesh's biggest markets

Vietnam has been breathing down Bangladesh's neck in the race for the global apparel market in recent years.

Bangladesh, the world's second-largest garment exporter after China, earned $38 billion from apparel in 2023, representing 7.4% of global share. Vietnam followed closely with $31 billion and 6% share. 

However, with Vietnam aggressively expanding its footprint in key markets – especially the US and EU – industry insiders believe Bangladesh's position is increasingly vulnerable.

"Vietnam is playing the long game," said Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development. "They've struck FTAs with major economies, secured market access, and scaled up man-made fibre (MMF) garment production – areas where Bangladesh still lags."

Despite hosting the largest number of green-certified factories and possessing strong backward linkages in textiles, Bangladesh remains overly reliant on low-value, basic garments. 

These are the very items most affected by tariff hikes and global pricing pressures.

"International retailers always push prices down for basic products," said Tapan Chowdhury, managing director of Square Pharmaceuticals and a leading garment exporter. "We need to produce high-end apparel if we are to survive the new trade order."

Slow diplomacy, fast-moving rivals

While Vietnam's deal with the US came after rapid negotiations and direct engagement at the highest level, Bangladesh is still in the consultation phase. 

The latest meeting, held last Thursday in Dhaka, was led by National Security Adviser Dr Khalilur Rahman and US Assistant Trade Representative Brendan Lynch.

"We've made good progress," Rahman said, but offered no timeline for completion.

With a July 9 deadline looming – after which the US plans to impose higher tariffs on nations without reciprocal agreements – Bangladesh risks missing a strategic opportunity. 

Other countries have moved much faster, with a Thai delegation already in Washington negotiating a deal. 

On the other hand, the UK and China have finalised deals.

Shams Mahmud, managing director of Shasha Denim Ltd, warned that the real impact may be felt when Bangladesh and Vietnam compete head-to-head during the winter export season – a critical period that includes the Christmas shopping boom in the West.

"Right now, we haven't been impacted much, but it will hit us hard after six months," he said. 

"Vietnam is a major competitor in winter items. If we don't take steps before that, we'll lose our market very easily."

He also criticised a lack of stakeholder consultation from the government's side.

"They're handling this unilaterally. No consultation, no meeting with exporters. How can you negotiate a national-level trade deal without industry input?"

Impending LDC graduation: A further complication

The impact of these tariffs is not limited to the RMG sector alone. Apparel accounts for more than 84% of Bangladesh's total export earnings, and any slowdown in that sector could affect foreign exchange reserves, employment, and gross domestic product growth.

Compounding the problem is Bangladesh's scheduled graduation from Least Developed Country (LDC) status in November 2026, which will remove key trade benefits from Western markets unless replaced with FTAs. 

While the EU and UK have pledged continued duty-free access, the US has made no such commitment.

"Bangladesh must address Trump's tariffs politically," said Anwar-Ul-Alam Chowdhury, chairman of Evince Group. "And we must take timely policy steps to soften the blow of LDC graduation."

Will missed opportunities come back to bite?

Vietnam has attracted more than $61 billion in Chinese investment in its textiles and garments sector, fuelling its rapid growth in high-end products. 

Bangladesh's comparable figure is less than 5%, largely due to regulatory barriers and lack of investor-friendly policies.

"This is where we're falling behind," noted Razzaque. "If we cannot build capacity in man made fibre (MMF)-based garments, we will not be able to fill the gap left by declining Chinese exports."

Faruque Hassan, managing director of Giant Group, added that Vietnam's export statistics often include both textiles and garments, while Bangladesh counts only garments. 

This makes Vietnam's apparent lead less clear-cut, but he warned that complacency would be dangerous.

"We need to explore new markets, diversify both products and destinations, invest in technology, and produce more value-added garments," he said. 

"That must go hand-in-hand with improving customs services, port operations, and removing non-tariff barriers."

Competitive edge blunted, but optimism remains

Although many have raised fears that prospective buyers may be deterred by the higher tariffs, other exporters remain cautiously optimistic. 

Md Fazlul Hoque, managing director of Plummy Fashions Ltd, dismissed fears of Vietnam overtaking Bangladesh any time soon.

"People have been saying that for years. But we're still growing," he said. "It's not about rankings – it's about delivering to the market what it demands."

Indeed, Bangladesh retains a strong presence in the EU and US markets, and has expanded rapidly in Canada and other emerging economies. For example, roughly one out of three people in the EU are decked out in denim pants produced in the country.

But industry leaders agree: without urgent reform, better trade negotiation, and value diversification, Bangladesh's dominance could fade not with a crash, but with a slow, quiet decline.

"We've reached a turning point," said Rubana Huq. "Now we must decide whether to evolve or be left behind."

Bangladesh v Vietnam in 2023 (WTO & industry estimates)