The US government declared that it would impose a new tariff of 10 per cent on Bangladesh, as it found that Bangladesh had failed to reduce forced labour in RMG production. After the implementation of the new tariff, the total tariff will be 25.62 per cent. Apart from Bangladesh, 59 other countries will also face the implementation of the new tariff.
Although this will be a challenge for Bangladesh because Bangladesh captured the largest market share in the USA in the RMG sector, the peers of Bangladesh in the US market will also be imposed commensurate tariffs, and the average tariff on them will be be an advantage for Bangladesh to keep its position strong.
By the implementation of the new tariff, the profit margin will definitely be reduced since the buyers may be stricter in their buying prices. So, the export volume may increase, but the profitability required for survival will be a challenge. The same facts will remain for the other competitors as well. They will definitely take steps to retain their position by reducing production costs. Bangladesh's most vital challenge is to cover the COGS in order to ensure profitability.
Recently, the RMG sector sought some privileges from the government to overcome the ongoing obstacles, such as utility deficiencies, a reduction in borrowing interest rates, refinance schemes, incentives, and so on.
To help the industry survive, the Bangladesh government has also taken several positive initiatives. However, proper supervision and effective management will be the top priorities to overcome these drawbacks.
Kawsik Azad Pronoy
A Banker and Economic Analyst