Businesses agog for reciprocally beneficial deal to scale tariff walls

Exporters here are agog for a reciprocally beneficial deal as a Bangladesh trade mission and their US counterparts sit for striking trade agreement before the United States imposes punitive tariffs that will make exports expensive.

Announced by US President Donald Trump-what are dubbed global tariff and trade wars-the new levies are set to take effect next week.

Business leaders remain hopeful that the government will be able to negotiate a mutually beneficial deal by offering to import Boeing aircraft, automobiles, capital machinery, wheat, cotton, liquefied natural gas (LNG), and various services from the United States.

The strategy is designed to help reduce the bilateral trade deficit - the main reason cited by the Trump administration for the tariff hike.

The government has so far held nearly 30 meetings and exchanged extensive documentation with the US side in an effort to reach an agreement.

Despite limited scope to offer reciprocal benefits, exporters remain cautiously optimistic about a breakthrough. Speaking to The Financial Express, Kutubuddin Ahmed, founder-chairman of Envoy Textiles Ltd, suggested the government could offer additional 2-3-percent incentives to spinning millers to offset the higher cost of importing US cotton.

"If the government offers this extra incentive in place of the current cash support, it will encourage entrepreneurs to source cotton from the US," said Ahmed, a former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

He notes that American cotton is approximately four-to-five-cent more expensive per pound than cotton from other sources.

He also recommends duty waivers on imports of US-made cars, capital machinery, and essential commodities like grains. However, he points out that US vehicles are left-hand drive, which poses a technical barrier to local use.

Ahmed further proposes boosting LNG imports from the US to address the trade imbalance. "Vietnam already offers duty-free access to all US imports. Bangladesh could consider a similar approach," he says about a tradeoff to scale the tariff walls being put up on the US market-the single-largest destination for Bangladesh's main export, apparel.

He also urges the government to include economists and trade experts in the negotiation team for better outcomes.

Additionally, he has called for reciprocal access to the US market for Bangladeshi exports made using American cotton, particularly denim and knitwear.

Shams Mahmud, Managing Director of Shasha Denims Ltd, has emphasised the need for a detailed roadmap from the Bangladesh side. Instead of focusing heavily on high-value Boeing purchases, he suggests engaging US companies in infrastructure development, such as modernising the power-distribution network.

He also recommends involving American firms in logistics development, particularly railway cargo and locomotive upgrades. "Such cooperation could significantly reduce the $30-35-billion trade gap over the next 10 to 15 years and build a long-term partnership."

Commerce Secretary Mahbubur Rahman confirmed that a draft reciprocal trade agreement has been finalised and expressed confidence about achieving a favourable outcome. As of the time of filing this report, a crucial meeting between officials was underway, with a follow-up session scheduled for July 8.

The Trump administration announced a new reciprocal tariff policy on April 2, including 37-percent tariffs on Bangladeshi cotton products-more than double the existing 16 per cent. Although a 10-percent baseline levy has already been introduced, the full tariff package has been held back until July 9.

In 2024, Bangladesh exported goods worth $8.36 billion to the US, while imports from the US amounted to $2.21 billion, according to data from the Bangladesh Bank and the Export Promotion Bureau (EPB).

As part of its balancing strategy, the government has committed to importing a large volume of wheat, 14 Boeing aircraft, and increased quantity cotton, oil, and gas from the US.

Mahmud Hasan Khan, President of BGMEA, voiced concern about the consequences of the tariff regime. "The additional 10-percent tariff is already affecting our exporters. If it increases further, we may start losing US buyers," he says.

Expressing cautious optimism, Mohammad Hatem, Executive President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said they were hopeful of a positive outcome before the July-9 deadline. "If the tariffs remain in place, it will be a temporary challenge for us, but, ultimately, it will hurt US buyers, who will have to pay higher prices for our products."

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