- The price of a $15 shirt made in Bangladesh will now cost $18.50 or more for US consumers
- CA’s Office says day 1 of 3-day negotiations ‘very comprehensive’
The country’s readymade garment (RMG) sector is already experiencing slow work orders from the US due to Bangladesh’s weak diplomacy in the negotiating Trump’s reciprocal tariffs.
Experts warn that the situation may worsen as buyers have already started offering to share the cost of the extra tariff.
The question remains as to who will pay the additional cost of the newly announced 35% tariff, in addition to the existing 15.5% tariff?
The chief adviser’s (CA) office said in a statement on Thursday that “the talks (9 July) were very comprehensive, touching upon almost all the key aspects of the trade relationship between the two nations.”
The three-day negotiations, which began on July 9, are scheduled to conclude on July 11 in Washington, DC.
In the meantime, regarding the tariff’s effect, Mohiuddin Rubel, managing director of Bangladesh Apparel Exchange and former director of the BGMEA, told Dhaka Tribune that US buyers have largely suspended negotiations for new orders.
“Now we are experiencing slow work orders.”
“Unofficially, they are talking about sharing a portion of the proposed additional tariff, although there has been no official proposal yet for price reductions or tariff sharing yet,” he added.
Inamul Haq Khan Bablu, managing director of Ananta Garments Limited, told the media: “We had a meeting with a US buyer company on Wednesday. They are asking us to bear a portion of the extra money due to the tariff on orders in the pipeline.”
Earlier Zahid Hussain, former lead economist at the World Bank’s Dhaka Office, told Dhaka Tribune that it is obvious that due to this reciprocal tariff, Bangladeshi products, like those of other countries who
got slapped with the new tariff, will be more expensive in the American market.
“The main question will be, who will pay this extra tariff?”
“American buyers must negotiate because they will try to keep their product as low as they can. It will pressure Bangladeshi exporters to reduce their costs. This situation may get much harder or worsen within a few days if the Bangladeshi negotiator can’t make any better deal with the US government,” he explained.
Before July 7’s 35% tariff imposition, earlier on April this year, Trump announced an additional 37% tariff on Bangladeshi goods.
However, while the tariff was initially set to take effect on July 1, the US president has extended the deadline to August 1.
Despite having a three-month window from April to July, Bangladesh managed to cut its own tariffs by only 2%—a token move compared to competitors like Vietnam and ahead of only four of the 14 countries that received Trump’s tariff threat.
Cost analysis
Bangladeshi goods previously had an average tariff of 15.50% so far. If the 35% extra tariff remains after August 1, then the average tariff on imports from our country to America will be over 50.50%.
Suppose a shirt made for a Western brand in Bangladesh used to be sold in US stores for $15.
That brand may be buying that shirt from a Bangladeshi garment company at a unit price (or purchase price) of $10.
The tariff on that $10 shirt used to be $1.55, but now it will be $5.05. So that company will have to pay $3.50 more than before.
If the 35% extra tariff is finally imposed, the price of the $15 shirt, which was made in Bangladesh, will now be approximately $18.50 or more for US consumers.
Some believe that the RMG industry will not be affected as much because the tariffs on Vietnam are a flat 20%.
According to the letter posted by Trump, among the other competitors in Bangladesh’s ready-made garment sector, only Laos (40%), Myanmar (40%), Thailand (36%), and Cambodia (36%) received higher tariff rates than Bangladesh.
The remaining countries facing hikes include Indonesia (32%), Serbia (35%), South Africa (30%), Bosnia and Herzegovina (30%), Malaysia (25%), Tunisia (25%), Japan (25%), South Korea (25%), and Kazakhstan (25%).
However, among Bangladesh’s other competitors like India and Cambodia, tariffs have not been announced yet. In the 1st phase of the Trump tariff, they got 30% and 47% reciprocal tariffs.
Effect on economy
This reciprocal tariff decision could lead to higher inflation in the US and a potential slowdown in its economic growth, economists said.
Experts 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.
“That may hurt Bangladesh’s economy because the RMG sector is the backbone of our exports.”
According to Zahid Hussain, 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.
Based on Otexa data, in the past year, 2024, the US imported apparel valued at $7.34 billion from Bangladesh. Considering a minimum tariff of 15.50%, the total duty for this import would amount to $1.14 billion.
Exploring the implications, if the recent implied tariff of 35% is combined with the previous minimum already in application, the total duty for last year’s imports from Bangladesh would have soared to $3.71 billion. This increase signifies an additional payment of $2.57 billion.
Data analysis also revealed that in 2024, the top 10 apparel-exporting countries to the US market are China ($79.25 billion), Vietnam ($16.50 billion), Bangladesh ($7.34 billion), India ($4.46 billion), Indonesia ($4.25 billion), Cambodia ($3.80 billion), Mexico ($2.62 billion), Honduras ($2.31 billion), Pakistan ($2.16 billion), and South Korea ($173.56 million).
Day 1 of 2nd round
The first day of the second round of tariff talks between Bangladesh and the United States was very comprehensive, the Chief Adviser’s (CA) office said in a statement on Tuesday.
The three-day negotiations began on July 9 and will be concluded on July 11 in Washington, DC.
It said, without providing further details, that the talks were very comprehensive, touching upon almost all the key aspects of the trade relationship between the two nations.
Commerce Adviser Sheikh Bashiruddin led the Bangladesh delegation in Washington, DC National Security Adviser Dr Khalilur Rahman and the Chief Adviser’s Special Assistant on ICT and Telecommunications, Faiz Ahmed Tayeb, joined the talks virtually from Dhaka. Senior Commerce Ministry officials also attended the meeting in the US capital.
Senior US officials from agriculture, energy, commerce, and copyright agencies joined the meeting.
Both sides will resume their meeting at 9p.m. in Bangladesh on Thursday. Talks will also be held on Friday.
Golam Mortoza, press minister at the Bangladesh Embassy, in a Facebook post on 10 July said: “The first day of discussions on Bangladesh-US tariff issues has concluded. Talks will continue tomorrow and the day after. Both sides have agreed on most points in terms of logic and arguments.”
However, it is too early to comment on the tariff issue, he added.
The first meeting of the second round of negotiations with United States Trade Representative (USTR) officials aims to finalize a draft bilateral trade agreement that could grant Bangladesh an exemption from the 35% tariff set to be imposed by the US from 1 August.
Source: Dhaka Tribune
