Zahid Hussain, Mustafizur Rahman, Selim Raihan. TBS Sketch
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Zahid Hussain, Mustafizur Rahman, Selim Raihan. TBS Sketch
President Donald Trump’s move to impose sweeping tariffs on US imports have sparked discussion on a possible global trade war, another round of inflation and fears of a recession.
In Bangladesh – for which the US is the single largest market for its apparel exports – the worries are palpable.
The Business Standard spoke with three top economists to get their reaction on what the tariffs might mean.
‘Tariffs may cut exports to US market; Bangladesh should go for negotiation right away’
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There is no doubt that the new tariff policy of the United States will have a negative impact on Bangladesh’s exports but this impact will be due to a decline in demand in the US economy, said Zahid Hussain, former lead economist at the World Bank’s Dhaka Office, today (3 April).
In his immediate reaction, he told The Business Standard that it is anticipated that the imposition of these tariffs will lead to an economic downturn in the US. “Prices of all goods will increase, which may reduce consumers’ purchasing power.
“As a result, there is a risk of a decline in exports from Bangladesh.
“Bangladesh should now engage in negotiations. It is essential to discuss with the US whether the data and calculations behind the 74% tariff on US exports to Bangladesh are accurate.
“At the same time, the government should inform the US about any reform initiatives it has undertaken regarding the indirect tariff factors that the US has considered in its decision,” Zahid said.
Additionally, efforts should be made to explore ways to benefit from any exemptions that the US is offering in the imposition of these tariffs, he added.
Earlier today, US President Donald Trump announced that the US is imposing reciprocal tariffs to match duties put on US goods by other countries, in a move that ratchets up a trade war that he kicked off on his return to the White House.
During an event in the White House Rose Garden, the US president displayed a poster that listed reciprocal tariffs, including 37% on Bangladesh, as a response to duties put on US goods.
Trump also said he would impose a 10% baseline tariff on all imports to the US and higher duties on some of the country’s biggest trading partners.
Zahid said the US justified imposing a 37% tariff on Bangladesh by arguing that US exports to Bangladesh face a total tariff of 74%, including both direct and indirect duties. “The Trump administration applied a 50% discount on this rate and imposed a tariff of 37%.”
He said the imposition of additional tariffs does not change Bangladesh’s competitive position in the US market, as similar tariffs have been imposed on other countries as well. In some cases, the tariffs on certain countries are even higher than those on Bangladesh.
Bangladesh’s competitor countries, such as Vietnam, Cambodia, India, Pakistan, and Sri Lanka, will not necessarily gain any additional advantage from this situation, he added.
Therefore, he believes that if Bangladesh can address the issues that led to the increased tariffs and negotiate to bring them down, there will be an opportunity to mitigate the negative impact.
The economist gave an example, stating that the Trump administration has granted exemptions in certain sectors, including pharmaceuticals — even extending exemptions to China in this case. Additionally, low-price and essential items have been given tariff exemptions. However, Bangladesh has not yet been included in these exemptions.
“Bangladesh could argue that it exports low-price and essential items, particularly affordable readymade garments. If there is an opportunity to classify other exported goods as essential items in the US market, Bangladesh should actively pursue that approach,” he stressed.
He said the Foreign Trade Barriers 2025 report released by the US Trade Representative (USTR) highlights that Bangladesh has a high number of non-tariff barriers, and the rationale behind these barriers is not transparent. The report also mentions that there is no level playing field in public procurement, and corruption is present.
The report, citing American companies, claims that there is a lack of transparency in Bangladesh’s government procurement system. It also points out government interference in data privacy, Zahid said.
Additionally, he continued, Bangladesh provides export subsidies, and while the country appears to have an open investment environment on paper, the reality is different. “In practice, investing in Bangladesh can be difficult due to various bureaucratic complexities and government-imposed hurdles.”
Zahid said the report provides a kind of guideline on why additional tariffs have been imposed on Bangladesh and what steps the country can take to get relief from these tariffs. “The government should engage with the relevant authorities, initiate negotiations, and address these concerns.”
“Bangladesh has already reduced export subsidies in several areas. The report also acknowledges the current government’s intent to implement reforms. The government should communicate what reforms have already been made and outline the upcoming reforms planned for the future,” he added.
He emphasised that exporters must also take collective action. “There needs to be a unified stance that buyers, not suppliers, should bear the additional tariff. This is similar to the approach taken by European Union businesses.”
“Bangladeshi businesses must move away from cutthroat competition among themselves. No individual seller should absorb the additional tariff to secure sales. Instead, the extra cost should be passed on to buyers. Competing countries like Vietnam and Cambodia are likely to adopt the same strategy,” said Zahid.
To implement this, BGMEA and BKMEA should develop a common strategy that all members must adhere to, he said. “There should also be enforcement measures, including penalties, for businesses that do not comply with this collective strategy.”
‘Trade war may cut global demand, Bangladesh exports to take a hit’
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The new tariffs imposed by the United States are unlikely to bring any major changes in market competition, as similar tariffs have been imposed on Bangladesh’s competitor countries, some even at higher rates, according to Prof Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD).
Speaking to The Business Standard today (3 April), he noted that the Trump administration’s decision could lead to higher inflation in the US and a potential slowdown in its economic growth. “This, in turn, could reduce demand in the US market, while a global trade war may further shrink demand worldwide, negatively affecting Bangladesh’s exports.”
In this context, he emphasised the need to boost Bangladesh’s productivity and engage in negotiations with the US.
Regarding the US claim that US exports to Bangladesh face a 74% tariff, Mustafizur questioned the calculation method, saying, “It is important to understand how the US arrived at this figure.”
Earlier today, US President Donald Trump announced that the US is imposing reciprocal tariffs to match duties put on US goods by other countries, in a move that ratchets up a trade war that he kicked off on his return to the White House.
During an event in the White House Rose Garden, the US president displayed a poster that listed reciprocal tariffs, including 37% on Bangladesh, as a response to duties put on US goods.
Trump also said he would impose a 10% baseline tariff on all imports to the US and higher duties on some of the country’s biggest trading partners.
“Bangladesh is the fifth-largest market for US cotton exports, and there is no tariff on cotton imports. The country also imports scrap from the US at a zero tariff. However, there is a 31% tariff on petroleum gas imports.
“These are the major imported commodities. So, why is the US mentioning a 74% tariff? This needs to be clarified,” explained the economist.
Additionally, he pointed out that the US has indicated special benefits for countries using American commodities in their exports. Since Bangladesh uses US cotton to manufacture apparel for export, he suggested that this issue be raised in Trade and Investment Cooperation Forum Agreement (TICFA) talks.
Furthermore, he recommended that Bangladeshi brands and buyers inform the Trump administration that Bangladesh’s apparel exports, including those to the US, rely on American cotton.