BD RMG exports slip as China targets EU market

Bangladesh's ready-made garment (RMG) sector may face rising competition in the European Union (EU), its top export market, as exports declined in May and China redirects its focus to the region amid high US tariffs, according to industry insiders.

They fear that US-imposed tariffs - including a proposed 35 per cent tariff on Bangladeshi products - may prompt many local exporters, as well as competitors like China, Vietnam, Cambodia, India, and Pakistan, to shift their focus more heavily to the 27-nation EU bloc.

This shift could intensify price competition, squeeze profit margins, and make it harder for Bangladeshi exporters to remain competitive.

A recent report by QIMA, a global supply chain compliance service provider, shows that in Q2 2025, demand from European brands for product inspections in China grew by more than 5.0 per cent year-on-year.

Demand rose sharply in the Netherlands (27 per cent), Austria (21 per cent), Spain (6.0 per cent), Poland (5.0 per cent), and Germany (4 per cent). In contrast, inspections and audits by US buyers in China dropped by 24 per cent.

Although Bangladesh's RMG exports to the EU grew by 17.8 per cent to €8.97 billion in the first five months (January-May) of 2025 compared to €7.61 billion a year earlier, exports to the EU dropped sharply in May.

According to Eurostat, the statistical office of the EU, apparel exports in May fell by 10.5 per cent year-on-year to €1.43 billion - the first decline of the year - from €1.59 billion in May 2024.

This fall contrasts with the strong performance earlier in 2025, including a sharp 60.8 per cent rise in January, which industry experts say could have been driven by inventory restocking or temporary demand spikes.

Meanwhile, China's apparel exports to the EU reached €9.04 billion between January and May 2025, marking a 17.1 per cent increase. The EU's total apparel imports grew 12.3 per cent to €36.82 billion in the same period, up from €32.79 billion a year ago.

Among other key competitors: Vietnam's exports rose by 15.7 per cent to €1.69 billion; Pakistan's by 20 per cent to €1.63 billion; Cambodia's by 30.3 per cent to €1.77 billion; and India's by 19.1 per cent to €2.38 billion.

Sayeed Ahmad Chowdhury, director of Operations at Square Denim, told The Financial Express that uncertainty in the US market due to new tariff rules has already pushed them to divert production to the EU. "We've started working with EU buyers like Inditex, which offer better prices and more consistent orders," he said.

He also pointed out that the closure of major players like Beximco, Nassa, and Mahmud Group has freed up capacity for EU-focused production. If the proposed 35 per cent tariff takes effect after August, it will further hurt pricing, he warned.

"There's always price pressure from the US. Often, suppliers are forced to absorb part of the extra 10 per cent tariff, which is unsustainable," Mr Sayeed added.

Former Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) president Fazlul Hoque said China may try to make up for lost ground in the US by expanding in the EU, which could further drive down prices and pressure Bangladeshi exporters.

"The US tariffs will also push local large exporters - heavily dependent on the US - to shift to the EU, Japan, and Australia, adding to competition," he said. At the same time, Bangladesh's high cost of doing business, due to rising energy prices, utility costs, and wage hikes, adds to exporters' struggles.

Exporters worry that if competitor countries like India face lower US tariffs, Bangladesh may lose its pricing advantage. Many exporters are already accepting work orders below production cost just to stay afloat and pay workers.

According to BGMEA data, Bangladesh exported 1.23 billion kilograms of garments to the EU in 2024 - a 10.18 per cent rise from 1.10 billion kg in 2023. However, the average price per kg dropped to $16.07 from $16.88 - a 4.84 per cent decline - highlighting continued pressure on pricing.

munni_fe@yahoo.com