Bangladesh heads to the polls with its vital garment industry under severe strain, after six consecutive months of falling exports driven by U.S. tariffs and domestic political and labour unrest. The sector, which accounts for roughly 80% of the country’s export earnings and more than a tenth of GDP, employs nearly four million workers most of them women and supplies major global brands.
Industry leaders say the election offers a potential turning point. With a new government expected, factory owners and workers alike hope for policy stability and economic recovery to stem mounting losses in the country’s economic backbone.
Impact of U.S. Tariffs
Factory owners describe the tariffs imposed by U.S. President Donald Trump as a “big disaster” for the sector. Duties on Bangladeshi imports were raised to 37% in April 2025, later reduced through negotiations to 35%, then 20%, and most recently to 19% under a new trade agreement. Previously, Bangladesh paid around 15% to access its largest export market.
The new deal introduces a system allowing a certain volume of Bangladeshi textile and apparel exports to enter the U.S. duty-free, with the zero-tariff quota linked to purchases of U.S.-made textile inputs such as cotton and synthetic fibres. While the agreement provides some relief, industry leaders caution that its overall benefit will depend on pricing structures, quota calculations and supply-chain adjustments.
Manufacturers say the unpredictability of tariffs has led to erratic order flows. Some months bring modest demand, while others see spikes, making financial planning difficult. For some exporters, 2025 has been the first loss-making year in decades, with margins squeezed by higher duties and rising production costs.
Political and Domestic Instability
The economic strain has been compounded by domestic turbulence following the 2024 ouster of long-time leader Sheikh Hasina. Bangladesh has since been governed by an interim administration after a mass uprising forced Hasina to flee. Reports of unrest and sporadic violence have unsettled international buyers, with some pulling back orders amid concerns about supply disruptions.
Manufacturers argue that the absence of a fully elected government has added uncertainty at a time when stability is crucial for export-oriented industries that rely on predictable logistics and governance.
Both major political parties the Bangladesh Nationalist Party and Jamaat-e-Islami have pledged to reduce the country’s heavy reliance on garments by diversifying exports into sectors such as leather, pharmaceuticals, agro-processing and jute. While diversification is seen as a long-term necessity, the garment sector remains indispensable in the near term.
Labour Pressures and Rising Costs
Labour unrest in 2024 further strained the industry, as workers demanded a sharp increase in the minimum wage. The interim government responded by raising the annual wage increment and shortening the wage review cycle, steps manufacturers say have significantly increased operating costs.
Factory owners report that international buyers continue to push for lower prices and faster production timelines, even as wages, energy costs and financing pressures rise. Industry leaders are calling for long-term policy consistency, banking sector reforms and competitive energy pricing to restore profitability.
Implications
The election could shape the trajectory of Bangladesh’s most important industry. A stable, democratically elected government may help rebuild buyer confidence and ensure continuity in trade negotiations with the United States and other key markets.
At the same time, structural vulnerabilities remain. Heavy reliance on a single export sector leaves the economy exposed to external shocks such as tariff hikes and global demand shifts. Even with the new U.S. trade deal, Bangladesh’s competitive edge will depend on how effectively it manages cost pressures and adapts to evolving trade conditions.
Analysis
The garment sector’s crisis underscores Bangladesh’s economic paradox: its greatest strength is also its greatest vulnerability. While the industry has powered decades of growth and lifted millions out of poverty, its dependence on external markets makes it highly sensitive to geopolitical and trade policy shifts.
The recent U.S. tariff reductions and quota system offer breathing space, but they do not eliminate structural risk. The immediate priority for the next government will be restoring investor confidence and policy stability. In the longer term, meaningful diversification will be essential to reduce exposure to external trade pressures.
For now, the election represents more than a political transition it is a referendum on economic stability for millions of workers whose livelihoods depend on the resilience of Bangladesh’s garment engine.
With information from Reuters.