Bangladesh faces higher rate despite lower trade gap

Although Bangladesh is the 52nd largest trading partner of the US and its trade deficit with the latter is much lower than its competitors, the Donald Trump administration has imposed a higher 35 per cent tariff on its products, analysts say.

They say the tariff on Bangladesh has likely been imposed on political grounds rather than the reciprocal methodology.

The countries which have good relations with the US or better lobbies in the Trump administration would get benefits, while the weak and poor ones like Bangladesh would be affected by the unjustified tariff structures, they add.

Analysing the US government's trade data, The Financial Express found that compared to Bangladesh, America's trade deficit with Vietnam was more than 20 times higher and with India 7.5 times greater in 2024.

Vietnam is the 10th largest trading partner of the US, while India is the 12th largest.

Although the US has imposed the tariffs on a reciprocal basis (by calculating trade deficit and the tariff imposed by the counterpart nation), the rates for Bangladesh are much higher than the latter's competitors like Vietnam and India.

The Trump administration has announced a 35 per cent tax on the import of Bangladeshi products, while it has drastically reduced that for Vietnam to 20 per cent, which was 46 per cent earlier.

Besides, the US proposed 26 per cent tax on Indian products, which would be effective from August 1 this year.

Trump on July 7 sent tariff letters to Bangladesh, Indonesia, Japan, South Korea, Malaysia, Thailand, South Africa, and several other countries.

The letters, signed by Trump, outlined the tariffs applicable to goods entering the US from August 1.

Earlier on April 2, Trump had announced reciprocal tariffs of 37 per cent for Bangladesh, 26 per cent for India, and 46 per cent for Vietnam.

However, he paused tariff implementation for 90 days to allow room for negotiations.

Later, the US president reduced the tax to 35 per cent for Bangladesh and 20 per cent for Vietnam.

The Indian media reported that the country is now very close to having a deal with the US to get some tariff benefits from the 26 per cent rate imposed in April.

According to the International Trade Administration (ITA) of the US Department of Commerce, Bangladesh exported goods worth $8.36 billion to the US in 2024 and imported products worth $2.29 billion from there, resulting in a $6.06 billion trade gap, which was in favour of Bangladesh.

The trade gap between the US and Vietnam was $123.46 billion in 2024 as the Southeast Asian nation exported goods worth $136.501 billion to the US and imported products worth $13.044 billion from there, the ITA data showed.

Moreover, India exported goods worth $87.34 billion to the US in 2024 and imported products worth $41.537 billion from there, resulting in a trade gap of $45.80 billion, which was in favour of the South Asian nation.

Mexico and Canada are the largest and 2nd largest trading partner of the US, respectively.

Dr Selim Raihan, an economics professor at Dhaka University, told The Financial Express Trump's reciprocal tariff is more political than commercial as he is now considering the countries that have better negotiation capabilities on a case-by-case basis.

He said since Vietnam's negotiation capacity is better than Bangladesh, it has been able to convince the Trump administration, thus bringing down the tariff to 20 per cent from the 46 per cent imposed earlier, which was 9.0 percentage points higher than that of Bangladesh.

This is a clear violation of the World Trade Organisation (WTO) rules, Mr Raihan, also the executive director of South Asian Network on Economic Modelling, told The Financial Express.

He also said this is a more geo-political or political or non-commercial issue.

Policy Exchange Bangladesh Chairman and Chief Executive Officer Dr Masrur Reaz told The Financial Express this is more political than commercial as it does not have the possibility of being resolved through trade talks only.

Trump considered the US investment; its exports, especially weapons and some other sophisticated products; and its political concerns and priorities while planning the reciprocal tariff imposition, he said.

Bangladesh needs to contact the powerful US political personalities and close allies of Trump to renegotiate the tariff structure, he said.

"Only trade negotiations are not enough for bringing down the 35 per cent tax imposed on Bangladeshi products. The country has to take measures from the political angle," the economist added.

Meanwhile, a Bangladesh government team, led by the commerce adviser, is now holding a discussion with the US authorities to reduce the massive 35 per cent tariff.

The two-day negotiation will end today (Thursday) in Washington, officials said.

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