Looming threat from reciprocal tariff

There has been heightened concern the world over about Donald Trump's reciprocal tariff ever since the radical policy on import duty was unveiled in April last. The 90-day tariff pause he announced following stock market crashes was precisely meant to secure 90 trade deals in those 90 days but he managed to accomplish only two. A day before the expiry of that period, Trump issued letters to heads of government in 14 countries, mostly South-East Asian, revising the rates of the levies announced in April. This time almost another three weeks' time has been granted for further negotiations for reaching a deal. The failure to do so will lead to enforcement of the revised tariff from August 1 next with no further extension of the deadline. According to the latest list of Trump's tariff rates, Bangladesh will face an additional 35 per cent duty on its commodities exported to the US. This is on top of the existing 15 per cent tariff Bangladesh exporters now have to pay. 

The government functionaries have tried to assure the people here that the issue is yet to be settled. A delegation headed by Commerce Adviser Sheikh Bashir Uddin, now in America, should have held a meeting with the United States Trade Representative (USTR) in favour of wresting concessions from the US side. But given the outcome of keeping the channel of negotiations with Washington for three months, there is hardly any reason to be optimistic about a drastic cut on US import duty. The rate of levy on export commodities from Bangladesh was lowered by only 2.0 per cent from the original 37 per cent. Exactly at this point, figures the case of Vietnam which could successfully negotiate a 20 per cent tariff on its goods exported to the US. Most importantly, of the two trade deals the Trump administration inked in the 90-day pause period, Vietnam's was one, the other being the US-UK deal.

That one of Trump's objectives was to counter China's growing influence in South-East Asia is certainly corroborated by the Vietnam deal which, although not made public, has been touted by Trump on his social media as satisfactory because American goods will enter Vietnamese market duty-free. Notably, despite the 20 per cent levy on Vietnamese commodities, the trans-shipment clause ---goods from third countries shipped via Vietnam or of origin including parts of a different country--- will be levied 40 per cent duty. All South-East Asian nations depend heavily on Chinese stuff made on a scale and at costs no nation can compete with. 

Inclusion of Bangladesh in the list of the 14 countries is therefore not intriguing. Geopolitics plays a part here and Bangladesh's increasing leaning towards China as a source country may provide the answer for not considering its case generously. Trump and Vietnamese state media confirmed US-made large-engine cars would have more access to Vietnam. 

Yet, according to a leading apparel businessman, Vietnam is not a rival to Bangladesh because the garment items that country exports to America are different from those of Bangladesh. But it is a fact that if 50 per cent tariff is enforced on export of garments to the US, smaller factories here will collapse and even the larger ones will have to incur losses no matter if they have to share half of the duty burden with US brand companies. The problem will be acuter if Bangladesh's competitors like India and Pakistan clinch deals at lower tariff rates with buyers moving away to those countries. Even if the meeting with the USTR yields no positive results, it would be wise to include seasoned leaders of the garment sectors and use their US connections as a lobby in favour of Bangladesh.

There is still three week's time.