A trade triumph for Bangladesh

At a time when global trade tensions are running high and tariffs are being used as tools of economic pressure, Bangladesh's achievement in securing a lower duty from the United States is both remarkable and beneficial. The reduction of the reciprocal tariff to 20 per cent from the previously announced 37 per cent not only protects Bangladesh's key export sectors from sudden disruption but also strengthens its foothold in the American market. Secured after months of rigorous negotiations, this outcome positions the country favourably alongside other key competitors like Vietnam and Sri Lanka which also face the same 20 per cent rate, while larger economies like India and China will grapple with higher tariffs of 25 per cent or more. The result demonstrates both the diplomatic finesse and clear understanding of global trade dynamics by Bangladesh's negotiating team led by commerce adviser Sk Bashir Uddin. Chief adviser Prof Muhammad Yunus aptly described this as a "landmark trade deal" and a "decisive diplomatic victory" which preserves and advances the country's comparative advantage in an increasingly complex global trade environment.

From an economic standpoint, the reduced tariff acts as an important protection for Bangladesh's export-driven growth model. In particular, the ready-made garment sector which forms the backbone of the country's exports and accounts for a significant share of its shipments to the US stands to take many positives. At the very least, this effectively restores Bangladesh's export position in the $8.0 billion US market to what it was before the tariffs. The Business and Tariff Management Association (BTMA) has also noted that this outcome levels the playing field, if not tilts it slightly in Bangladesh's favour, compared to many other exporting countries. While competitors like Cambodia and Pakistan negotiated a marginally lower 19 per cent tariff, Bangladesh's larger production capacity, well-established supply chains and economies of scale in the ready-made garment sector more than compensate for this slight difference.

The diplomatic success in securing a reduction of the US tariff notwithstanding, the outcome raises important questions about what Bangladesh may have had to offer in return. Media reports suggest the concession was partly achieved through commitments to purchase 25 Boeing aircraft and other American commodities such as wheat and cotton aimed at narrowing the trade imbalance. However, the wisdom of investing heavily in Boeing jets is questionable, especially given Biman Bangladesh Airlines' longstanding reputation for poor service and operational inefficiencies. The airline reportedly experiences an average 23 per cent vacancy rate on international routes. Rather than expanding a struggling civilian fleet, Bangladesh might have prioritised more strategic defence acquisitions such as advanced fighter jets for the Bangladesh Air Force, the aging fleet of which faces safety and operational risks. Notably, Vietnam has reportedly procured F-16s through similar trade negotiations, a move that shows how defence procurement can simultaneously help address trade deficits while enhancing sovereign capabilities.

Furthermore, to make the most of this achievement and the opportunities from the lower tariff, the government must address the challenges facing other export-oriented industries that continue to hold back growth. For instance, the leather and footwear sector remains constrained by the absence of a fully functional Central Effluent Treatment Plant (CETP) in the Savar Tannery Industrial Complex. This sector has the potential to become a major source of foreign exchange, provided compliance and environmental concerns are resolved. Policymakers must undertake the necessary reforms to ensure Bangladesh does not miss the opportunity to diversify its export basket, thus paving the way for sustained economic growth in the years ahead.