America's retaliatory tariff hikes are unlikely to have any major impact on Bangladesh's competitiveness, says leading trade- economist Dr Zaidi Sattar, citing relative cost advantages, high production capacities and environmental compliance among guardrails.
Also, Bangladesh entrepreneurs are reliable and dynamic, he says, while suggesting that government should go for renegotiating with the Trump administration and lowering duties on certain US products.
Apparel makers, in particular, are advised to open negotiations with buyers on price rises commensurate with impacts of the US 'reciprocal tariffs'.
"Bangladesh's exporters may retain their relative competitiveness, but the overall impact remains uncertain due to reduced trade flows as tit-for-tat tariffs raise prices and dampen demand worldwide," Mr Sattar, Chairman and Chief Executive of the Policy Research Institute of Bangladesh (PRI), told the FE Friday, as the Trump tariff tempest shakes global economy with market slump.
China is hit hard as it is now subject to 54 per cent additional tariffs because of the 20 per cent tariffs already slapped on its imports earlier, he says explaining how Bangladesh could benefit from trade diversion away from China as global buyers seek alternative suppliers.
"Bangladesh has the relative advantages of cost competitiveness, high production capacities, increasing environmental compliance, and reliable and dynamic entrepreneurs," also says the former economist of the World Bank.
He, however, stressed for strategic negotiations for yielding good results saying Bangladesh average tariffs on imports from US are 26 per cent (nominal tariffs) and 54 per cent (total trade taxes).
Since Bangladesh runs a lower trade surplus with US (about US$6 billion), compared to China ($300 billion), Vietnam ($123 billion), India ($49 billion), and as US imports mostly low-value products--RMG, rather than electronic or high-tech products from Bangladesh, Dr Sattar explained.
Talking over US tariffs and global developments, the former World Bank economist termed US "reciprocal tariffs" announced on April 02 'a reality' and added these tariffs, if they last, will fundamentally change world trade.
Ostensibly, the US has invoked "economic emergency" and "national security" Article XXI exception to WTO rules, he mentions. In practice, it is by far the most appalling attack yet on the global rules-based trade order.
It seems like the "my way or the highway" logic imposed on trading partners, with an offer of coming to the negotiating table.
"These tariffs have rocked the world economy and expect subsequent negotiations and tit-for-tat tariffs that will continue to infuse turbulence and uncertainty in global trade and investment for some time," he notes.
Dr Sattar quotes leading American trade economist Dani Rodrik who summarizes the situation bluntly: broad tariffs "hurt the US economy, and more so than they do other economies".
All Bangladesh exports to the USA, including RMG, will now be subject to an across-the-board 37-percent additional tariff because the US government has estimated that their exports to Bangladesh face an average of tariffs and tariff-equivalent trade barriers at 74 per cent.
The US strategy has been to impose tariffs at roughly 50 per cent of tariffs US exports face in these countries.
Rather than searching for actual Bangladesh tariffs the 'ad hoc computation', according to him, is that in 2024, Bangladesh exports to the US were worth $8.4 billion, the trade surplus with the US was $6.2 billion and so the ratio (6.2/8.4) equals 74 per cent.
One-half of that is 37 per cent, the additional duty applicable to imports from Bangladesh, he says about the US tariff arithmetic.
Among other RMG-competitor countries, China will face 34-percent additional tariff, Cambodia 49 per cent, Vietnam 46 per cent, Pakistan 29 per cent and India 26 per cent.
According to the April 02 announcement, each country will have to negotiate one-on-one if they want lower tariffs, he mentions a way out.
"Our estimates show Bangladesh average tariffs on imports from US are 26 per cent (nominal tariffs) and 54 per cent (total trade taxes)," Mr Sattar says, but total trade taxes on automobile imports average 160 per cent, though cotton imports have zero tariffs and the highest imports (Ferrous metals and scrap) have 1.5-percent tariff equivalent; most machinery are subject to the lowest tariffs (1.0 per cent to 3.0 per cent).
In FY2024, Bangladesh imported some $2.2 billion from the United States collecting customs revenue of some $190 million.
He thinks since Bangladesh runs a lower trade surplus with the US compared to China, Vietnam and India and the US imports mostly low-value products from Bangladesh, strategic negotiations could yield positive results.
"Lacking any market power, the scope for taking a tit-for-tat tariff stance will be unwise," the economist suggests.
He further says though setting discriminatory tariffs on a single country violates the MFN principle of the WTO, these US tariffs could soon be dubbed a "global economic emergency".
"So, negotiating countries might invoke the same 'economic emergency' or 'national security' clause for setting specific rates on US imports, unless this is used as an opportunity for rationalizing and scaling down MFN tariffs," the economist notes about action in reciprocity.
Citing various estimates that suggest global GDP could shrink by about 1.0 per cent and trade by 3.0 per cent, he predicts Asia could be hard hit by an intensified US-China trade war.
Talking over strategies, he said negotiating stance should be to reduce US specific import tariffs on alcoholic beverages and automobiles to 25 per cent, for example, removing all regulatory duty (RD) and supplementary duty (SD) and leaving only customs duty (CD).
Tariffs on cotton is zero (0%) and scrap metals 1.5 per cent, which constitute the highest import items from the US, are already low, so these should not raise any issues.
"There is no scope for retaliatory tariffs," Mr Sattar notes, adding that tariffs on non-RMG exports to America, like footwear, will have to be reduced substantially to meet US demands.
He suggests reducing anti-export bias and incentivizing exports to the US market.
"RMG exporters need to work with buyers on ways to share the cost escalation from tariffs through adjustment of prices, within the constraints of very limited market power for Bangladeshi suppliers," he adds.
Munni_fe@yahoo.com
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