Mohiuddin Rubel, a former director on the Bangladesh Garment Producers and Exporters Affiliation, was quick asleep at residence in Chittagong when somebody texted him about President Donald Trump’s newest spherical of tariffs on U.S. imports. He briefly roused, glanced on the message and went again to mattress.
It was solely the next morning, with the solar streaming in via the home windows, that he registered the enormity of what had occurred in a single day. Standing within the Rose Backyard of the White Home on Wednesday, Trump had introduced a whopping 37 p.c so-called “reciprocal” tariff on Bangladeshi exports — almost 85 p.c of which comprise ready-made clothes — to america.
“It was an enormous shock,” mentioned Rubel, a further managing director at Denim Skilled, a jean producer. “We had been anticipating good progress and good enterprise within the U.S. We by no means realized that one thing like this might occur.”
America is Bangladesh’s third-largest buying and selling associate after China and India. In 2024, america imported $8.4 billion price of products from the South Asian nation, which, in flip, obtained $2.2 billion in American exports, in keeping with the Workplace of the U.S. Commerce Consultant. This created a commerce surplus of $6.2 billion — one which was 2 p.c increased than the $6 billion from the 12 months earlier than — that put Bangladesh within the sightlines for what Trump has characterised as “taking benefit” of america.
However the transfer may have probably catastrophic penalties for Bangladesh, which continues to be popping out of a interval of chaos and uncertainty following the violent ouster of former prime minister Sheikh Hasina and her “crony capitalist” Awami League authorities.
For one factor, the nation wasn’t ready for this, Anwar Hossain, who was appointed in October because the BGMEA’s short-term administrator following the dissolution of the commerce group’s board of administrators, advised native media, saying that “it got here swiftly.” On the similar time, Muhammad Yunus, the Nobel Peace Prize laureate on the helm of Bangladesh’s interim authorities, mentioned via an middleman that the nation’s leaders are hopeful that negotiations are nonetheless potential and that “we are able to craft out one of the best deal.”
Loads hinges on this. The orders that had collapsed throughout that point had been exhibiting indicators of returning in a pointed swerve from China, which, within the earliest days of the Trump 2.0 administration, had been slapped with 20 p.c tariffs that made Bangladesh’s then-15 p.c seem like a discount compared.
However whereas Bangladesh nonetheless has a leg up towards the world’s second-largest economic system — starting April 9, Chinese language imports will likely be topic to a further 34 p.c hike — the costs of the nation’s items for U.S. patrons will nonetheless see an uptick, particularly compared with its less-sanctioned neighbors India (26 p.c) and Pakistan (29 p.c). Its solely comfort is that Vietnam, with whom Bangladesh has been jostling for the spot of number-two garment exporter, has been dealt a levy of 46 p.c. Sri Lanka, one other competitor, additionally has a heavier yoke of 44 p.c.
A part of the calculus, in keeping with Md. Rafiqul Islam Rana, an assistant professor of retailing on the College of South Carolina, is that Bangladesh has one of many lowest minimal wages for manufacturing, although that has confirmed to be an issue in and of itself, because the 2023 minimal wage protests have proven. It’s essential, he mentioned, that Bangladeshi producers “negotiate neatly” with American patrons to “preserve their edge.” And because the tariff is reciprocal, Bangladesh should additionally work with delegates to search out methods to decrease the 74 p.c tariff Trump claims Bangladesh has positioned on American imports, which may assist ease the general burden.
“They could have cited solely the highest-duty objects. We’re cross-checking the information,” Abdur Rahman Khan, chairman of the Nationwide Board of Income, advised The Each day Star when requested in regards to the determine. “The U.S. might need referenced both peak or common charges. We at the moment are analyzing the precise numbers.”
However, the subsequent few weeks are going to be crucial for everybody concerned, Rana mentioned. “First issues first, they should type out the in-transit orders — who’s going to cowl the additional prices from the tariff hike?” he added.
That’s the rub for Rubel. Regardless of who finally foots the invoice for the tariffs, items will undoubtedly get dearer, which may imply that manufacturers purchase much less. Various Bangladesh’s 4,000-plus garment factories, most of which haven’t diversified past cotton-based attire, have additionally organized themselves round making clothes solely for the American market. Now they may cede enterprise to seemingly extra aggressive climes akin to Jordan, Honduras or Kenya, that are on the lowest 10 p.c tariff stage. “We’re so depending on the U.S. market,” he mentioned. “That is the dangerous a part of this.”
Md. Fazlul Hoque, managing director of Plummy Vogue, a “inexperienced” knitwear producer in Narayanganj, mentioned he fearful that the value squeeze from patrons on suppliers will intensify, as has reportedly been the case with sure big-box retailers and their Chinese language producers.
“My pondering is that they won’t go for a value hike on the retail aspect,” he mentioned. “Slightly, they are going to move on the additional tariff proportion to their suppliers, which may imply an enormous value strain even with orders already positioned, in manufacturing or in transit.”
That will additionally spell extra dangerous information Bangladesh’s 4 million garment staff, a lot of them girls, who’ve needed to grapple with the lack of assist companies from civil society organizations hobbled by America’s overseas assist cuts, mentioned Kalpona Akter, govt director of the Bangladesh Middle for Employee Solidarity, a staff’ rights group. She mentioned she’s genuinely fearful that this might end in job losses for staff nonetheless reeling from the aftermath of the COVID-19 pandemic and the financial downturn stoked by Russia’s assault on Ukraine and the Israel-Gaza battle.
Faisal Samad, managing director of Savartex Group, a textile producer in Dhaka, in addition to a former BGMEA vice chairman, agreed, saying that the impression will likely be “very excessive,” each for U.S. patrons and for factories that conduct important enterprise with america.
“Walmart and Goal distributors have already got to provide costs which can be aggressive for the kinds that patrons are shopping for out of Bangladesh,” he mentioned. “Now, with these new tariffs, there will likely be a big value enhance on the landed items. And if tariffs stay, the patrons’ place will likely be to ask factories to cut back their already tight costs to recuperate the tariff blow.”
In the long term, there must be some give and take, Samad mentioned, including that “changes must be constituted of each ends or Bangladesh must discover an amicable deal for the U.S. authorities to amend the tariff construction, given the dependency of the RMG commerce on the Bangladesh economic system.”
One answer is to slim the U.S.-Bangladesh commerce hole. Simply final month, overseas affairs adviser Md. Touhid Hossain instructed that Bangladesh import extra American cotton to deflect further tariffs. Rubel mentioned that even shrinking the brand new tariffs by 10 p.c would put it on a extra even keel with Pakistan and India. There’s additionally the truth that Bangladesh is poised to graduate from the United Nations’ Least Developed International locations class subsequent November, which means that the European Union may impose a 12 p.c tariff on attire imports that had beforehand gone untaxed.
“It will likely be a bit of bit shaky for us after the LDC commencement, for certain,” he mentioned. “And if the EU acts in the identical manner because the U.S.? We’ll undoubtedly have a little bit of a tricky time forward.”
