Ensuring US market access

The three-month pause on "reciprocal" tariffs announced by the Trump administration for all countries except China leaves a narrow window for action. While three months is scarcely enough time for any government to negotiate a complex trade deal, this is the timeframe within which Bangladesh must operate. In his letter to the US president Donald Trump, chief adviser Muhammad Yunus had requested the postponement of US tariff measures for this specific duration, a period he said was needed to implement initiatives to increase US exports to Bangladesh. With his wish granted, it is now the government's responsibility to seize this opportunity to protect the largest single-country destination for Bangladesh's goods. 

Against this backdrop, the Centre for Policy Dialogue (CPD) recently organised a discussion titled "Trump Reciprocal Tariffs and Bangladesh: Implications and Response" to examine the strategies for responding to the emerging situation. It is already well established that, contrary to its name, the US's reciprocal tariff is not truly reciprocal but rather a unilateral measure aimed at reducing its trade deficit. As noted during the discussion, exports from the US to Bangladesh face an average duty of 6.2 per cent, which drops to 2.2 per cent after rebates, while Bangladeshi products entering the US face tariffs averaging 15.2 percent. Given that the existing tariff structure already favours the United States, any proposition from Bangladesh for further tariff reductions is unlikely to generate reciprocal interest. Some experts at the CPD event suggested that securing a Free Trade Agreement (FTA) with the US could help safeguard Bangladesh's export market. Examples of several developing countries, such as Jordan, which have FTAs with the US, were cited to illustrate the possibility of Bangladesh achieving such an agreement through effective negotiation. However, this policy suggestion misses the mark, as the primary focus of the US tariff measures is to increase its exports to address trade deficits. It is therefore highly improbable that the US would agree to reduce tariffs without this key concern being addressed. It is worth noting that having an FTA did not prevent Jordan from being subjected to 20 per cent reciprocal tariffs as it maintained a trade balance unfavourable to the US.

While pursuing an FTA and activating the Trade and Investment Cooperation Forum Agreement (TICFA) as suggested in the CPD dialogue may be valuable in the long term, the severely limited timeframe within which Bangladesh must find a solution renders this approach less useful. Any viable solution to navigate the current challenge must involve a positive response to the US demand for a more balanced trade relationship. There are indeed measures that Bangladesh can take towards achieving this. For instance, Bangladesh's top imported item is refined petroleum, valued at almost $7 billion per year, primarily sourced from countries with which Bangladesh holds significant trade deficits, including China, India, Malaysia and Singapore. Another major import of Bangladesh is cotton and cotton yarn, procured mainly from China and India. Notably, the United States is the world's leading exporter of both refined petroleum and raw cotton. Rather than importing these crucial items from countries with whom Bangladesh already has substantial trade deficit, redirecting a portion of these imports to the US could be a pragmatic move toward balancing bilateral trade.

For long-term security and resilience, Bangladesh must diversify its export markets to reduce the risks of over-reliance on any single market. However, extraordinary circumstances call for extraordinary measures, and in the short term, redirecting key imports to the US appears to be the most viable option. If pursued deftly, such a strategy could not only help Bangladesh avoid punitive tariffs but also create additional entry points for its products in the US market.