The recent decision of the United States (US) government to impose a 37 per cent 'discounted reciprocal tariff' on Bangladeshi exports has reverberated with shock through the country's business and policy circles. As per a chart published by the White House, Bangladesh is reported to levy an effective 74 per cent tariff on American goods, ranking it among the highest US trading partners.
This development, part of Trump's "Liberation Day" trade policy, aims to counter what the administration describes as unfair trade practices and protectionist barriers against American exports. Under the new framework, the US has introduced a baseline 10 per cent tariff on all imports, with significantly higher rates for countries accused of currency manipulation or high trade barriers.
This poses a serious challenge for Bangladesh. The US is our single largest export destination, particularly for the RMG sector, which contributes more than 80 per cent of total exports. A 37 per cent tariff could significantly erode our competitive edge, especially as key competitors like India (26 per cent), Pakistan (29 per cent), and Vietnam (46 per cent) face varying but comparatively lower tariff rates.
To effectively tackle this challenge, Bangladesh must adopt a proactive, strategic approach. This involves leveraging both diplomacy and trade policy adjustments to mitigate risks and enhance economic ties with the US.
A key step in this strategy would be to revisit tariff structures on US imports to create room for negotiation. Currently, Bangladesh imposes a 5 per cent Advance Income Tax (AIT) on US raw cotton, a critical input for the textile industry. Reducing this tax to zero per cent -while simultaneously seeking duty-free access for garments manufactured using US cotton-could be a pragmatic move.
This approach, if successful, could lead to a win-win situation. US exporters, especially cotton producers, would gain a larger, more reliable market in Bangladesh. Bangladeshi apparel manufacturers, already grappling with high production costs, would regain a competitive edge in the US market, fostering a sense of hope and optimism.
Additionally, Bangladesh already offers zero duty on aircraft parts and 5 per cent on scrap metals, with low tariffs on LPG and energy imports. Extending a zero-duty framework to key US exports-such as cotton and high-tech equipment-could position Bangladesh as a priority partner under the US "reciprocal tariff" doctrine.
Trade policies are rarely set in stone, and diplomacy plays a crucial role in shaping tariff negotiations. To counteract the new tariff structure, Bangladesh must: (a) initiate immediate diplomatic engagements with US trade representatives to argue for a fairer framework; (b) strengthen bilateral trade cooperation by highlighting Bangladesh's contributions to the US supply chain; (c) leverage regional alliances-especially within South Asia-to advocate for more balanced US trade policies; and (d) explore alternative trade routes and diversify export markets to reduce over-reliance on the US market.
While the 37 per cent tariff poses a significant challenge, it also presents an opportunity to reshape Bangladesh-US trade relations. If approached strategically, this moment could lead to a more balanced, resilient, and sustainable trade framework, securing long-term economic stability for Bangladesh.
In times of adversity lie opportunities. Now is the time for decisive, creative, and courageous action.
Md. Sahidul Islam is Head of Business, Corporate Head Office, Shimanto Bank PLC. sahidul.islam@shimantobank.com
