Trade Shock: Bangladesh Shocked as US Slaps 35% Tariff on Exports

• US Tariff Announcement: President Donald Trump announced a 35% tariff on Bangladeshi goods, slightly reduced from the initial 37%, effective from August 1, 2025.

• Negotiation Period Ended: A 90-day pause on the 37% tariff, announced in April, expired on July 9, 2025, with no significant breakthroughs in negotiations.

• Economic Concerns: Bangladeshi economists and business leaders fear the loss of the country’s competitive “win-win” position in the US market.

• Market Implications: The tariff hike could disrupt Bangladesh’s export-driven economy, particularly affecting industries like textiles and garments.

The New US Tariff on Bangladesh

On July 7, 2025, US President Donald Trump announced a 35% tariff on Bangladeshi goods, effective August 1, down from an earlier 37% proposed in April. This decision, shared via a letter on Truth Social to Bangladesh’s Chief Adviser Muhammad Yunus and other world leaders, cites Bangladesh’s trade imbalance with the US and its reliance on Chinese imports as key reasons. The tariff applies to all Bangladeshi products, with additional measures to prevent goods being rerouted through third countries to avoid the duties.

Trump warned that if Bangladesh retaliates by raising its own tariffs, the US could increase duties beyond 35%. This has left Bangladesh’s business community worried, as the country’s garment sector, a major export driver, faces significant challenges.

Impact on Bangladesh’s Garment Industry

Bangladesh’s garment industry, a cornerstone of its economy, is at the heart of this trade issue. The US is a major market for Bangladeshi garments, importing $4.62 billion in woven garments and $2.4 billion in knitwear in the first 11 months of fiscal 2024-25. However, the woven sector, which relies on China for nearly 70% of its fabric, is particularly vulnerable. In contrast, the knitwear sector sources 90% of its fabric locally, making it less affected.

The US has introduced strict Rules of Origin (RoO), requiring 40% of a product’s value to be added locally to qualify for market access. Industry leaders, like Anwar-Ul-Alam Chowdhury of Evince Group, say meeting this requirement is “almost impossible” due to the heavy reliance on Chinese materials. Experts like Masrur Reaz from Policy Exchange and Mostafa Abid Khan, a former trade official, agree that these rules could severely hurt the woven garment sector.

Caught in the US-China Trade War

The tariff is seen by many as part of a broader US strategy to counter China’s economic influence. Bangladesh, which imports $16.63 billion in goods from China (26.4% of its total imports), relies heavily on Chinese raw materials for its garment industry. The US is pressuring Bangladesh to reduce this dependency, putting the country in a difficult position.

Choosing between the US, its largest customer, and China, its biggest supplier, is a tough call. Bangladesh has tried to ease tensions by offering to import more US goods, like LNG, cotton, soybeans, and Boeing aircraft, to narrow the $6 billion trade gap. However, US negotiators are also pushing for changes in Bangladesh’s tariff system to align with American geopolitical interests, which conflicts with World Trade Organization (WTO) principles.

Negotiation Challenges and Concerns

With the tariff set to take effect soon, Bangladesh’s business community believes there’s little time left to renegotiate. Many question the effectiveness of Bangladesh’s proposals during the 90-day negotiation window that ended on July 9, 2025. Despite this, Finance Adviser Dr. Salehuddin Ahmed remains hopeful, noting that a Bangladeshi delegation is in Washington for further talks as of July 11, 2025.

The US has also raised concerns about Chinese investments in Bangladesh, intellectual property laws, and labor rights. There’s also a fear of additional tariffs if the US labels Bangladeshi goods as “transshipped” from China, similar to penalties imposed on Vietnam.

What’s Next for Bangladesh?

The Bangladesh Garment Manufacturers and Exporters Association, led by Mahmud Hasan Khan, is pushing for urgent action, including hiring lobbyists to negotiate with the Trump administration. However, the broader issue goes beyond trade. As Masrur Reaz notes, Bangladesh’s reliance on Chinese suppliers cannot be changed overnight, making it hard to meet US demands.

The new tariff threatens Bangladesh’s competitive edge, especially as rival Vietnam secured a lower 20% tariff by removing duties on US goods. For now, Bangladesh’s garment industry faces an uncertain future as it navigates these complex trade and geopolitical challenges.

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Bangladesh’s garment industry, a key economic driver, is under pressure from the new 35% US tariff and strict Rules of Origin. Caught between the US and China, Bangladesh must find a way to balance its trade relationships while protecting its market position. Ongoing negotiations offer some hope, but time is running out to secure a better deal.