Bangladesh secures 20 percent US tariff for garments, exporters relieved

Arab News

6 days ago

DHAKA, KARACHI, AHMEDABAD: Bangladesh has negotiated a 20 percent tariff on exports to the US, down from the 37 percent initially proposed by US President Donald Trump, bringing relief to exporters in the world's second-largest garment supplier.
The new rate is in line with those offered to other major apparel-exporting countries such as Sri Lanka, Vietnam, Pakistan and Indonesia. India, which failed to reach a comprehensive agreement with Washington, will face a steeper 25 percent tariff.
Trump put steep tariffs on exports from dozens of trading partners, including Canada, Brazil, India and Taiwan, ahead of a Friday trade deal deadline.
• India faces higher 25 percent tariff on apparel shipments.
• Pakistani exporters cautious about impact of 19 percent tariff.
The outcome secured by Bangladesh — home to a $40 billion apparel export sector — reflects careful negotiation, said Khalilur Rahman, national security adviser and lead negotiator.
'Protecting our apparel industry was a top priority, but we also focused our purchase commitments on US agricultural products. This supports our food security goals and fosters goodwill with US farming states,' Rahman said. Muhammad Yunus, the head of the country's interim government, called it a 'decisive diplomatic victory.'
The readymade garments sector is the backbone of Bangladesh's economy, accounting for more than 80 percent of total export earnings, employing about 4 million workers, and contributing about 10 percent to gross domestic product.
The prospect of higher US tariffs has rattled Bangladesh's ready-made garments industry, which fears losing competitiveness in one of its largest markets.
'While the 20 percent tariff will cause some short-term pain, Bangladesh remains better positioned than many of its competitors,' said Mohiuddin Rubel, additional managing director at Denim Expert Ltd, which makes jeans and other items for brands including H&M.
Exporters in neighboring India said the relatively higher tariffs levied would hurt the country's textile exports, as its competitors like Bangladesh, Vietnam and Cambodia got lower tariffs.
'We are hoping that the tariffs will be rationalized. We will have to recalibrate our strategies depending on the final tariff imposed, said Chintan Thakker, chairman of industry body ASSOCHAM in the state of Gujarat, a major apparel exporter.
'Devil will be in the details'
Pakistan, which exported about $4.1 billion worth of apparel to the US in the 2024 fiscal year, secured a tariff rate of 19 percent, but industry figures were cautious about the immediate impact.
'Considering India's lower production costs and the likelihood of it negotiating reduced tariffs in the near term, Pakistan is unlikely to either gain or lose a meaningful share in the apparel segment,' Musadaq Zulqarnain, founder and chair of Interloop Limited — a leading Pakistani exporter.
'If the current reciprocal tariff structure holds, significant investment is likely to flow into DR-CAFTA countries and Egypt,' he said, referring to a trade agreement between the US and a group of Caribbean and Central American countries.
Elsewhere in South Asia, Sri Lanka also secured a 20 percent tariff rate from the US, which accounted for 40 percent of its apparel exports of $4.8 billion last year.
'The devil will be in the details as there are questions over issues such as trans-shipment, but overall it's mostly good,' Yohan Lawrence, secretary general of the Joint Apparel Associations Forum, a Sri Lankan industry body, told Reuters.