Bangladesh-US talks on tariff walls end today

Hope against hope lives on for cuts in the 35-per cent additional tariffs on Bangladeshi exports to the US market as the second round of three-day negotiations between Bangladesh and the United States end today in Washington.

Meanwhile, the Trump-touted 'reciprocal tariff' turmoil begins to grate on US buyers as reports say some of them are seeking alternative apparel sourcing to skip price rises.

"The talks in the first two days were very comprehensive, touching upon almost all the key aspects of the trade relationships between the two nations," said a spokesperson for the CAO in Dhaka Thursday.

The two sides resumed their meeting at 09.00pm Bangladesh time Wednesday. Last-ditch negotiations will also be held today (Friday) in a bid to break the standoff that affects Bangladesh's trade deeply.

Commerce Adviser Sheikh Bashiruddin led the Bangladesh delegation in Washington. National Security Adviser Dr Khalilur Rahman and Chief Adviser's Special Assistant on ICT and Telecommunications Faiz Ahmed Tayeb joined the talks virtually from Dhaka. Senior Commerce Ministry officials also are in attendance at the meet in the US capital.

Senior US officials from agriculture, energy, commerce, and copyright agencies joined the meeting.

A number of apparel buyers are seeking alternative sourcing options amid rising tariffs -- some are even visiting emerging apparel-manufacturing countries. On the other hand, some buyers have already halted order placements in Bangladesh due to uncertainty surrounding the US tariff hike and ongoing negotiations with Bangladesh, according to industry owners.

They also mention that this uncertainty may cast impact on up to 25-percent orders for the upcoming seasons for summer, autumn-winter 26/27. While summer is the biggest season for Bangladesh knit-garment export to the USA, which accounts for about 30 per cent of Bangladesh RMG exports.

Industry-insiders say considering the production cost, including low tariffs, Jordan, Egypt, Kenya and Ethiopia could be alternative sourcing destinations. However, as a saving grace for Bangladesh apparel, these countries have infrastructural challenges.

Referring to the past shift of garment production from China to Bangladesh due to high tariffs and rising costs, a similar trend is now being observed -- production is moving not only from Bangladesh but also from India, Pakistan, Vietnam and other countries.

Due to the newly announced 35-percent reciprocal tariffs by Donald Trump, Bangladeshi products may now face a total tariff of 51 to 82 per cent on the US market. As a result of this change, no matter how capable or efficient Bangladesh's garment industry is, sustaining export to the US will become increasingly difficult under such high-tariff trade regime.

Firstly, this steep tariff hike will make Bangladeshi products uncompetitive in terms of price. Although Bangladesh currently makes garments under tariff structures that are higher, lower, or similar to those of China, Pakistan, India or Vietnam, this advantage is unlikely to last. This is because the nature of the textile and garment industry is such that production tends to shift to countries where costs, tariffs and labour wages are lower.

Sparrow Group Managing Director Shovon Islam says, "This is a natural rule of business and part of the global production cycle. Although such a shift requires infrastructure development, investment and quality improvement in some countries -- as was the case for Bangladesh -- these challenges will gradually be overcome. Countries like China, India and South Korea are expected to invest heavily in those emerging production destinations."

He also mentions that Chinese investors may invest in South American countries as they are enjoying duty-free trade facility, bar Brazil, a China-led BRICS-member country.

Talking with The Financial Express Thursday, Shahs Denims Ltd Managing director Shams Mahmud said almost every US buyer halted orders after the tariff hike declared in April.

"They are waiting for decision from the Trump administration on import from Bangladesh -- they would not place before the final settlement," he added about the stalemate.

Shams Mahmud said, "We were very careful about US orders since Trump's second-time election and now only 2.0-percent capacity has been occupied for US buyers."

Shovon Islam questions the effectiveness of the initiatives taken by the interim government of Bangladesh, saying the visible efforts have failed to reduce the additional 35-percent tariffs.

He emphasizes that exporters should explore Asian countries as alternative destinations to weather the headwinds blowing in from the US in the West.

He adds that for Bangladesh to survive in this shifting landscape, it is essential to build competitive advantages through infrastructure development, technological advancement, and skills enhancement.

Shams Mahmud also notes that the letter from US President Trump has extended the negotiation window for Bangladesh until August 1.

Shovon Islam states that his company faced a cancellation from a major US buyer, the largest online retailer.

"We have a $10 million business with that retailer," he explains. "Recently, we received orders that were originally placed through a Vietnamese company. Unfortunately, those orders were redirected back to Vietnam due to the tariff issue."

He says another US brand, with whom they do around $60 million in annual business, may reduce their orders by up to 10 per cent this year.

Last year, Sparrow Group's total exports stood at $259 million. This year, they set a target of $300 million by increasing production capacity -- adding 16 new lines, with another 14 lines currently under development. However, this plan may be impacted by the tariff hike, as the US accounts for half of Sparrow Group's total export market.

The exporter notes that the tariff hike may impact up to 20 per cent of demand on the US market as it could create inflationary pressure

Speaking to The Financial Express, BKMEA President Mohammad Hatem said he exports around $1.2 million worth of knitwear to the US annually. "Due to the recent 10-percent tariff hike, my buyers have asked me to share 5.0 per cent of the additional cost."

He adds adjusting this amount through profit margins would be difficult, and that the buyer has already withheld payment for those shipments.

"If tariffs increase further, we will no longer be able to do business with US buyers," he forewarns, noting that the buyer is now seeking lower-cost production facilities elsewhere -- although such a switch would take time.

Referring to SK Bashir Uddin, the BKMEA President said, "The Adviser informed me that talks are ongoing, and we are hopeful of reducing the tariffs."

According to data from the United States Trade Representative (USTR), bilateral trade between the US and Bangladesh came to $10.6 billion in 2024.

US goods imports from Bangladesh totalled $8.4 billion in 2024, of them $7.404 billion apparel imports from Bangladesh rose by 2.15 per cent.

On the other hand, US goods exports to Bangladesh stood at $2.2 billion, down 1.5 per cent of $34.0 million from 2023. The US goods-trade deficit with Bangladesh was $6.2 billion in 2024, reflecting a 2.0-percent increase ($123.2 million) from the previous year.

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