US President Donald Trump announced reciprocal tariff; as a result, Bangladeshi products, like those of any country that imposes tariffs on American products, will be more expensive in the American market from now on.
According to Trump’s announcement, tariffs on Bangladeshi goods have been increased to 37%.
Bangladeshi goods previously had an average tariff of 15% so far, but the new tariffs have now more than doubled.
The United States is one of Bangladesh’s two major export markets. A large portion of Bangladesh’s main export product, readymade garment (RMG), is exported to the country.
Bangladesh’s annual exports to the United States are worth about $8.4 billion, mainly RMG. Last year, ready-made garment exports to the United States stood at $7.34 billion.
The average tariff on American products is 74%. The Trump administration applied a 50% discount on this rate and imposed a tariff of 37% for Bangladesh.
Economists and businesses highlight that Bangladesh could negotiate because it is the fifth-largest market for US cotton exports, and there is zero tariff on cotton imports.
Bangladesh also imports scrap from the US at a 4% tariff. However, there is a 5% tariff on butane import (a key ingredient to produce LPG), zero tariff on soybeans and cotton.
Impact
A shirt of made for a western brand in Bangladesh, used to be sold in US stores for $10. That brand may be buying that shirt from a Bangladeshi garment company at a unit price (or purchase price) of $5.
The tariff on that $5 shirt used to be $0.75, but now it will be $2.60. So that company will have to pay $1.85 more than before.
As a result, the price of that $10 shirt will be increased by about $1.85 more.
Some are of the opinion that the RMG industry will not be affected as much because the tariffs on Vietnam (46%), China (34%) and Cambodia (47%) will be higher than Bangladesh.
Among the other competitors in Bangladesh’s ready-made garment sector, 10% tariffs have been imposed on Turkey, 27% on India, 30% on Pakistan, 44% on Sri Lanka.
Effect on economy
Bangladesh mainly exports medium and low-priced products. The price of these products in the US market is between $20 and $60. On the other hand, Vietnam, China or even India are now exporting high-priced clothing.
As a result, experts say it can be assumed that Bangladesh will not be affected as much as they will be affected.
According to Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD): “Comparable tariffs have been imposed on Bangladesh’s rival nations, some even at higher rates, so it is unlikely that the new US tariffs will significantly alter market competition.”
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, he added.
According to Zahid Hussain, former lead economist at the World Bank’s Dhaka Office: “There is no question that the United States’ new tariff policy would hurt Bangladesh’s exports, but this effect will be hit on by a drop of demand in the US economy.”
Inflation
This reciprocal tariff decision could lead to higher inflation in the US and a potential slowdown in its economic growth, economists said.
Business insiders explained that buyers bear the cost of duties, and if US buyers find that the added tariff increases the product price beyond their market threshold, they will seek alternative sourcing to minimize costs.
BGMEA Vice-President Rakibul Alam Chowdhury told the media: “Rising costs of manufacturing—driven by wage hikes and soaring inflation—are making it increasingly difficult for Bangladeshi manufacturers to stay competitive.”
Economists emphasized boosting Bangladesh’s productivity and engaging in negotiations with the US.
Mustafiz said: “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.”
Zahid also suggested: “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.”
Exporters suggest that now Bangladesh should reduce the current tariff rate on US goods from 74% to 30%. This will result in a US tariff of 15% again.
Looking at the net of Bangladesh’s imports from the US, exports from Bangladesh to the US, and global competitiveness, experts hope people will see that the country will benefit in this process.
However, the Bangladesh government is already reviewing its tariffs on products imported from the United States (US), said Chief Adviser’s Press Secretary Shafiqul Alam on Thursday.
In his verified Facebook account, he wrote: “The National Board of Revenue is identifying options to rationalize tariffs expeditiously, which is necessary to address the matter.”
