US President Donald Trump has once again stirred the world trade order. On 13 February 2025, he announced that reciprocal tariffs would be imposed on America’s trade partners. His statement was, “I will charge a reciprocal tariff, meaning whatever countries charge the United States of America, we will charge them.” This stance suggests a new economic protectionist policy that could have widespread consequences. While the main target is China, this policy could also affect other major economies such as the European Union, India, and Mexico.
Global financial markets are already feeling the effects of this announcement, with stock market volatility creating concerns about the future of trade. Many trade analysts believe this tariff system could increase trade disputes worldwide, leading to retaliatory measures that might complicate international economic relations.
Bangladesh itself could also face risk in this situation. In 2023, the United States had a trade deficit with 48 countries (of at least one billion dollars), with China at the top at 279 billion dollars, followed by Mexico (152 billion dollars) and Vietnam (104 billion dollars).
The trade deficit with India was approximately 43.5 billion dollars, and India ranked 11th. Bangladesh ranked 25th, with a trade deficit of over 6 billion dollars with the US. While this amount is small compared to larger economies, the suddenness and uncertainty of Trump’s administration’s policy, coupled with Bangladesh’s dependency on exports to the US and its high import tariffs, puts Bangladesh at risk of facing counter-tariffs and potential increases.
Among these 48 countries, Bangladesh and Cambodia are the only two least-developed countries (LDCs). Cambodia is already facing some US sanctions and has a trade surplus with the US of over 11 billion dollars. This could make Cambodia an easy target for additional US tariffs.
After the Rana Plaza collapse in 2013, the US suspended Bangladesh’s GSP status, so Bangladesh currently does not enjoy tariff-free access to the US market. However, after Bangladesh graduates from LDC status in 2026, the country could face significant risks. If new tariffs are imposed, this could have a detrimental impact on Bangladesh’s exports, especially in the readymade garment sector, which is the backbone of the country’s economy.
Government policymakers must work closely with business establishments, industrialists and stakeholders in export-oriented sectors to maintain competitiveness and open new markets. Furthermore, through policy reforms and diplomatic efforts, Bangladesh must preserve its trade advantages. In particular, Bangladesh must strengthen bilateral and multilateral trade negotiations to reduce the negative impacts of US policies.
Over 80 per cent of Bangladesh’s total exports come from the readymade garment sector, and the US is one of its major markets. If new tariffs are imposed on garment exports, the cost of imports for US buyers would rise. As a result, orders could fall, and buyers might turn to alternative suppliers.
Given the global competition in the garment industry, US importers may source products from countries that enjoy special trade privileges with the US, potentially reducing Bangladesh’s market share.
Other than the garment sector, other emerging industries in Bangladesh are at risk. The leather, footwear and pharmaceutical industries have seen increased market presence in the US in recent years. However, if new tariffs are imposed, growth in these sectors could slow, weakening Bangladesh’s position compared to competing countries.
For example, while Bangladesh’s pharmaceutical exports have seen significant growth recently, any additional tariffs on the US market could hinder access and reduce opportunities for market expansion.
The uncertainty surrounding US trade policy could also negatively affect foreign direct investment (FDI) and trade partnerships. Investors typically prioritise a stable trade environment. If uncertainty about accessing the US market increases, many multinational companies may reconsider their investment plans in Bangladesh, particularly in export-oriented industries. This could hinder long-term job creation and industrial development. In response to this adverse situation, Bangladesh’s policymakers must act quickly and strategically. Three key strategies are crucial:
First, specific risk assessment: A data-driven analysis is essential to identify the specific impacts of potential tariff increases. A detailed analysis of bilateral trade according to the 6-digit Harmonized System (HS) codes will reveal which products are most at risk. Business owners and policymakers must collaboratively seek alternative markets and make strategic decisions regarding costs. It is crucial to take coordinated action with industry associations and trade experts.
Second, diplomatic dialogue: Active and meaningful dialogue with US policymakers, trade representatives, and relevant stakeholders is essential. Bangladesh’s mission in Washington, DC and US diplomats in Dhaka must engage in more effective discussions to prevent any adverse trade policies from taking effect. Additionally, Bangladesh should work to protect its interests through the World Trade Organization (WTO) and regional trade alliances.
Third, enhancing economic risk management: Structural reforms in taxation, trade policy, and industrial strategy need to be accelerated. Export diversification is crucial to reduce over-reliance on the garment sector. Encouraging investment in high-value-added production and service sectors, and improving commercial infrastructure, must be prioritised.
The global trade environment is becoming increasingly uncertain, with new tariff policies, geopolitical conflicts, and changes in supply chains determining the course of business worldwide. In such a scenario, Bangladesh cannot afford to remain passive, especially since its economy is heavily export-dependent. The US “reciprocal tariff” policy poses risks that the government must address through strategic and effective measures, which will not only mitigate short-term losses but also ensure long-term economic stability.
Government policymakers must work closely with business establishments, industrialists and stakeholders in export-oriented sectors to maintain competitiveness and open new markets. Furthermore, through policy reforms and diplomatic efforts, Bangladesh must preserve its trade advantages. In particular, Bangladesh must strengthen bilateral and multilateral trade negotiations to reduce the negative impacts of US policies.
Additionally, to remain competitive in the long run, Bangladesh must invest in tax system reforms, trade infrastructure development, and innovations in technology. By monitoring the future direction of US policies, Bangladesh must take specific steps now to protect its economic interests, ensuring that any sudden decisions do not severely affect its export sector. With timely action and visionary policies, Bangladesh can strengthen its position in the global market and maintain economic growth despite external pressures.
**Selim Raihan, Professor of Economics at University of Dhaka, and Executive Director, SANEM
** This column appeared in the print and online edition of Prothom Alo and has been rewritten for the English edition by Rabiul Islam
