Chasing the American dream

The United States (US) is the primary destination for Bangladeshi exports, especially readymade garments (RMG), accounting for one-fifth of total apparel exports. On April 2 last year, the largest export market faced a setback due to President Donald Trump's reciprocal tariffs. Consequently, in the first six months of fiscal year 2025-2026 (FY26), exports declined every month except July. The growth rate was 12.84 per cent in FY25 but dropped by 2.19 per cent in the first half of FY26. December alone saw a sharp 14.25 per cent decline. Exports continued falling for eight months, with January down 0.50 per cent and February down 12.03 per cent.

The Trump administration's reciprocal tariff is not the sole reason for this negative trend. A more significant factor is that importers and buyers are waiting for a stable democratic environment, specifically an elected government and a peaceful political atmosphere.

The good news is that on February 9, 2026, Bangladesh signed an Agreement on Reciprocal Tariff with the US. Under the agreement, the reciprocal tariff has been reduced to 19 per cent. A major achievement is zero tariff on exports of garments made using cotton and synthetic fibres imported from the US. The US produces the world's finest quality cotton. While we also import cotton from Brazil, Australia, Mali, Benin, Burkina Faso, and India, US cotton is slightly more expensive. The zero-tariff facility on finished products will make us more profitable. Since 54 per cent of Bangladesh exports are knitwear produced from natural cotton, using US cotton will unlock this zero-tariff advantage. The time has come to capitalise on this.

Europe remains a massive market for Bangladesh, accounting for half of our total garment exports. However, the recent India-EU Free Trade Agreement (FTA) has raised concerns about maintaining Bangladesh's position. This agreement between India and the 27 EU nations covers two billion people and about 25 per cent of global GDP. Under this deal, 144 Indian sub-sectors, including garments, textiles, leather, and footwear, will gain duty-free access to the EU. Bangladesh currently enjoys GSPEBA (Everything But Arms) facilities in the EU, which will continue until 2029 even after LDC graduation this November. We must prepare now for the GSP-Plus transition after 2029.

Even before the FTA with the EU, when the US imposed a 50 per cent reciprocal tariff on Indian goods, India took steps to boost exports to Europe. Indian government and textile representatives approached major European buyers such as Inditex Group (Zara), Polish LPP, German Aldi and Lidl, and French Auchan and C&A Netherlands, offering garments at lower prices. Similarly, China began supplying low-cost garments to the EU to offset shocks in the US market. As a result, the unit price of Bangladeshi garment products in the EU dropped by 3.84 per cent in 2025.

There has been long-standing talk about export diversification, but specific planning and development are lacking. Seventy per cent of our garment exports are cotton-based, while nearly 70 per cent of global apparel is made from MMF (Man-Made Fibre) or synthetic materials. Now is the time to leverage the zero-tariff facility by exporting MMF or synthetic garments to the US using American raw materials.

Beyond traditional European and American markets, we must expand exports to new destinations like the Gulf countries, Japan, Korea, Australia, New Zealand, and Latin America. The recently signed Bangladesh-Japan Economic Partnership Agreement (EPA) is a landmark deal that must be fully utilised. Under this agreement, 99.9 per cent of Bangladeshi products receive zero-duty access to Japan.

So, we remain optimistic that despite all adversities, Bangladesh will soon achieve its cherished goal of $100 billion in garment exports.

Mohammad Esha is Deputy Managing Director, Pubali Bank PLC