Bangladesh's economic future amid shifting geopolitics of supply chain

As the global order reshapes around competing supply-chain architectures, Bangladesh finds itself in the challenging but strategically significant middle. The United States and China - two indispensable partners in Bangladesh's economic lifeline - are increasingly locking horns over trade, technology, and infrastructure. For Dhaka, this superpower competition offers both opportunity and peril.

A Web of Asymmetric Interdependence

Mustering the strategies of playing within a web of asymmetric interdependence comes as a foremost consideration. Bangladesh's economy is entangled in a dual dependency. The U.S. and the European Union remain its primary export markets, together accounting for the bulk of its US$52 billion in garment exports. China, meanwhile, dominates the import landscape - supplying machinery, textiles and consumer goods worth nearly $23 billion, as of 2024. This asymmetry - surpluses with the West, deficits with Asia - creates what economists call 'asymmetric interdependence,' where disruptions from either side could be economically devastating.

As Washington trades on tariffs on Chinese goods - reaching 145 per cent in 2025 - and Beijing retaliates, the collateral impact is already visible across Asia. For Bangladesh, which sources most industrial inputs from China but earns its foreign exchange in dollar from the West, a prolonged tariff war may threaten future production, export competitiveness and fiscal stability.

From balancing to multi-alignment poses a challenge. Bangladesh's traditional 'balancing' amongst major powers - avoiding overt alignment whilst engaging all - is becoming increasingly untenable. The current interim government led by Dr Muhammad Yunus faces a complex regional reality too: India is recalibrating ties with Beijing, Washington, and Kabul, while Pakistan is deepening engagement with the Trump 2.0 administration and forming a formal defence alliance with Saudi Arabia. And close by, Myanmar remains a volatile frontier for great-power politics.

Within this flux, Bangladesh's strategy must evolve beyond passive balancing towards pragmatic multi-alignment - engaging multiple partners simultaneously, but on its own terms.

Multi-alignment is not synonymous with neutrality. Instead, it embodies a strategic approach to collaboration and diversification: partnering with China on infrastructure development, engaging Japan and Korea in industrial -enhancement initiatives, working alongside the U.S. and the EU to facilitate market access and harmonise standards, and fostering dialogue with India and Pakistan on regional trade and security matters.

Ports, power, and the politics of infrastructure: Bangladesh's ports - especially Matarbari and Payra - exemplify how infrastructure has become a new battleground of geopolitics. Matarbari, primarily financed by Japan through JICA, will be Bangladesh's first deep-sea port capable of handling 100,000-tonne vessels. Beyond the economic benefits - a projected 2-3-percent boost to GDP and reduced shipping costs - the port is a statement of strategic alignment.

Choosing Japan for Matarbari's financing partially signalled Dhaka's intent to preserve strategic autonomy whilst continuing to engage Beijing in other areas, such as defence and energy.

Energy transition and strategic vulnerability: Bangladesh's energy story exposes its most acute supply-chain vulnerability. Despite commendable growth in power -generation capacity, over 65 per cent of the country's energy inputs are now imported. Natural gas reserves are depleting, coal and oil imports are rising, and renewables contribute barely 3.0 per cent of total electricity.

The Power Division projects that by 2041, 90 per cent of fuels will be imported - an alarming trajectory that undermines both economic competitiveness and national security.

Digital dependencies: AI and data dilemma: Digital dependency is Bangladesh's Achilles' heel. Its ambition to be a player in the Fourth Industrial Revolution rests on its growing artificial intelligence ecosystem, supported by the National AI Policy 2024 and over 1,000 start-ups. However, the country's digital infrastructure remains under external sourcing. The U.S. and Chinese firms dominate cloud computing, semiconductors, data storage, and connectivity.

As the U.S. and China navigate their competition in technology through export controls and different data regimes, Dhaka needs to foster interoperability while avoiding dependency. Prioritising the development of indigenous cloud infrastructure, adopting neutral digital standards, and enhancing data-protection laws will be crucial steps forward. Additionally, policymakers need to gain a comprehensive understanding of the geopolitics surrounding semiconductors and rare-earth elements-often referred to as the "new oil". Such understanding will be an invaluable skill for Bangladesh's future growth and collaboration.

Defence indigenisation: from dependence to diversity: Defence procurement illustrates another facet of Bangladesh's structural dependency. Over two-thirds of its arms imports come from China. The ongoing diversification - including procurement from Turkey, talks with Pakistan, and cooperation with the U.S. - represents an effort to broaden options and develop indigenous defence capabilities. Undoubtedly, we need to strengthen defence modernisation and diversification efforts in cooperation with the U.K., France, Korea, and Japan as well.

Supply chain statecraft and strategic institutional capacity: What Bangladesh needs now is a strategy for supply-chain statecraft - recognising that trade, technology, infrastructure, and defence decisions are strategic, not merely economic. This requires building 'strategic institutional capacity' - the state's ability to coordinate across ministries, anticipate external shocks, and negotiate effectively in a fragmented global order.

We must consider establishing a high-level Trade and Economic Policy Council or the like. Such a formal initiative would aim to harmonise trade, finance, and foreign policy, facilitating diversification of infrastructure partnerships to mitigate the risks of strategic dependency and enhance our technological sovereignty.

This endeavour would require a proactive, future-oriented mindset from both politicians and bureaucrats, with a clear objective of empowering the private sector, which is increasingly influenced by geopolitical dynamics. Businesses need to adapt through economic diplomacy, market diversification, and adherence to global standards.

That means the private sector in Bangladesh must engage with the broader geopolitical landscape. Western buyers are increasingly linking supply chains with newer regulations, whilst partnerships with Eastern neighbours often intertwine economic cooperation with political considerations. Consequently, the private sector needs to evolve as an integral component of strategic statecraft, uniting competitiveness with an astute awareness of geopolitical currents.

As such, a path forward ought to be carved out of the evolving intricacies. Bangladesh's path to becoming a developed nation by 2041 will hinge not merely on GDP growth but on strategic autonomy. Every infrastructure deal, energy contract, and technology partnership must now be viewed through a geopolitical lens. If Bangladesh can master the art of multi-alignment and embed resilience in its supply chains, it can transform vulnerabilities into leverage.

Remember, the world is reorganising around supply chains. Bangladesh must ensure it is not simply caught within them but actively shaping them.

Professor Shahab Enam Khan, PhD, is the Executive Director of the Bangladesh Centre for Indo-Pacific Affairs at Jahangirnagar University, Bangladesh, and teaches International Relations at the Bangladesh University of Professionals. He can be reached at shahab.e.khan@gmail.com