On April 2, 2025, the United States announced tariffs of 37% on a range of imported goods, including apparel and textiles, a sector that accounts for over 80% of Bangladesh’s export earnings. Trump claims 10% tariffs on all nations and even higher rates of up to 50% on specific countries with which they have trade deficits.
The decision, justified by the Trump administration as a measure to protect domestic industries, promote fair trade, and protect jobs, which will expand the US economy, poses a significant challenge for Bangladesh’s economy. With the US being Bangladesh’s single largest export destination (accounting for nearly $10 billion in exports in 2023), Bangladesh must respond strategically to mitigate economic shocks while securing long-term trade resilience.
Understanding the US Decision and Its Implications
The US has been gradually shifting its trade policies to reduce dependency on Asian manufacturing hubs, encouraging US consumers to purchase more American goods, increasing the amount of tax raised, and leading to significant levels of investment in the nation, favoring domestic organizations. The new tariffs, reportedly ranging from 10% to 50% in different countries, targeting 37% specific categories of ready-made garments (RMG) of Bangladesh, come amid growing global trade protectionism. For Bangladesh, the new measures could further squeeze profit margins in an already competitive sector, which was used to doing business after losing GSP facilities, and faced an average of 15% regular tariffs on the apparel industry
In a sector that employs over 4 million workers, the majority of whom are women, even a 10% higher tariff may restrict export growth by at least 5% annually, putting thousands of jobs in danger, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). After imposing 37% tariffs, the consequences may be more hazardous. The timing of concern regarding US tariff difficulties, which could result in the loss of some trade privileges, is very worrisome. Therefore, specific tactics and approaches should be employed to enhance exports, benefiting Bangladeshi entrepreneurs.
Short-Term Measures: Diplomatic Engagement and Export Diversification
Diplomatic negotiations must be established to solve the reciprocal tariffs issue by reducing the trade deficit with the US. Importing more US products is the way to reduce the trade deficit, which may help to continue exports in the US market. Chief Advisor Professor Muhammad Yunus has already started to talk with US trade representatives to kindly postpone the application of reciprocal tariffs on Bangladesh exports for three months by addressing to significantly increase import of US farms products, including cotton, wheat, corn, and soybean, which will contribute to the income and livelihood of US farmers. For increasing the speed to market of US cotton, warehousing facility is offered in Bangladesh, which will have duty-free access as well as continuing to commit zero tariff on the above American Agricultural commodities and scrap metals, working on 50% reduction of tariff on top US export items such as gas turbines, semiconductors and medical equipment. He also mentioned launching Starlink in Bangladesh. For more negotiations, Bangladesh can collaborate with the US-Bangladesh Business Council and lobby groups in Washington to advocate for favorable terms. A bilateral trade agreement (BTA), though ambitious, could be a long-term goal to secure stable market access.
Additionally, Bangladesh must aggressively explore new markets. Over-reliance on the US and EU (which together absorb nearly 90% of Bangladesh’s RMG exports) is a structural vulnerability. Japan and South Korea, both countries, have shown increasing demand for high-value garments and offer preferential tariffs. While China is a competitor in textiles, China’s rising middle class presents an untapped market for Bangladesh’s affordable apparel. Regional markets should also be strengthened. The South Asian Free Trade Area (SAFTA) and potential trade deals with India could offset US losses. According to the World Trade Organization (WTO), Bangladesh’s exports to non-traditional markets grew by 12% in 2024, a trend that must be accelerated.
Furthermore, to take advantage of many chances for cooperation and trade between the two nations, Bangladesh can also enter into vendor business, in which vendors purchase goods or services from distributors and resell them to other nations. Bangladesh is a good market for Bangladeshi clothing producers because it has duty-free access to 52 countries, including Turkey, for 46 RMG products. For example, Bangladesh has duty-free access to Turkey for specific RMG goods, allowing Bangladeshi apparel manufacturers to compete in the Turkish market. Turkey can then export the goods to the US market at 10% tariffs, reducing Bangladesh’s 27% tariffs.
Medium to Long-Term Strategies: Moving Up the Value Chain and Economic Reforms
Bangladesh’s RMG sector remains heavily dependent on basic apparel. To remain competitive, the industry must transition to high-end fashion, technical textiles, and athleisure wear, which command better pricing and face lower tariff sensitivity. The government should expand incentives under the Bangladesh Hi-Tech Park Authority to attract foreign direct investment (FDI) in textile machinery and automation. Skill Development should also be prioritized. Partnering with institutions like the Asian Institute of Technology (AIT), Bangladesh can train workers in advanced manufacturing techniques.
Bangladesh has to concentrate on enhancing trade infrastructure and business-friendly practices. Bangladesh’s ports, logistics, and customs clearance are still ineffective. Bangladesh is ranked 100th out of 160 nations in the World Bank’s Logistics Performance Index (2024), lower than Vietnam (39th) and India (44th). The ports of Chittagong and Mongla should be modernized to minimize shipment delays; customs procedures should be digitized to decrease bureaucratic red tape; and free trade zones (FTZs) should be expanded to draw in international enterprises.
In the long run, strengthening alternative industries would allow Bangladesh to remain a vital component of the competitive global market. Despite RMG’s dominance, Bangladesh needs to expand its export industries. Bangladesh could benefit from its WHO-certified medication production skills, such as Pharmaceuticals, which are already a $2 billion sector. IT and Outsourcing: The digital sector has grown at 20% annually; policy support can make Bangladesh a rival to India and the Philippines in IT services. Leather and Footwear: Despite environmental concerns, the leather industry has potential if compliance with international standards improves.
The US tariff announcement is a wake-up call for Bangladesh to reduce dependency on a single industry and a few markets. While immediate diplomatic efforts are crucial, long-term success depends on economic diversification, upgrading manufacturing capabilities, and improving trade infrastructure. The government, private sector, and international partners must collaborate to turn this challenge into an opportunity. If Bangladesh acts swiftly, it can not only cushion the blow of US tariffs but also lay the foundation for a more resilient, high-value economy.