Doors yet open for talking reciprocal tariff parity

Keeping the doors yet open for possible tradeoff, the US has declared a slightly slashed 35-percent tariff on Bangladesh's products exported to the American market with effect from August 01.

President Donald Trump cut 2.0 per cent from the previously proposed across-the-board tariff rate of 37 on imports from Bangladesh, suggesting in his letter to the head of Bangladesh's interim government, Prof Yunus, a rethink on 'tariff and para-tariff barriers' facing US products.

Trump wrote to the interim chief in the letter, dated July 7, "Our relationship has been, unfortunately, far from Reciprocal. Starting on August 1, 2025, we will charge Bangladesh a Tariff of only 35 per cent on any and all Bangladeshi products sent into the United States, separate from all sectoral Tariffs."

He offers that there will be no tariff if Bangladesh, or companies within the country, decide to build or manufacture product within the United States. And, "in fact, we will do everything possible to get approvals quickly, professionally, and routinely -- in other words, in a matter of weeks".

Trump writes they look forward to working with Bangladesh as trading partner for many years to come. "If you wish to open your heretofore closed Trading Markets to the United States, and eliminate your Tariff, and Non-Tariff, Policies and Trade Barriers, we will, perhaps, consider an adjustment to this letter."

These tariffs may be "modified, upward or downward, depending on our relationship with your Country. You will never be disappointed with The United States of America."

On April 02, the Trump administration had announced an additional tariff of 37 per cent. It was supposed to be made effective from April 09 last.

After request from different countries, including Bangladesh, White House announced a 90-day pause on the Reciprocal Tariff Policy on April 9, 2025. The suspension was supposed expire today (9 July, 2025).

But, instead, will expire on August 01, 2025. After extension of the timeframe, Bangladesh will get three weeks for more, in-depth, negotiations and fixing its position on the newly imposed tariff rates, according to the commerce ministry.

The newly imposed rate is higher than that of Bangladesh's RMG-export rival Vietnam as Donald Trump has more than halved the additional tariffs for Vietnam from 46 per cent to 20 per cent.

In this regard, the US administration has also sent letters -- undersigned by Trump -- to the leaders of other countries, too.

A meeting for second thoughts on the predated across-the-board 35-percent tariffs is expected to be held on July 10-11 in the morning of US time between the visiting Bangladesh delegation and the US trade officials.

National Security Adviser under the post-uprising government Khalilur Rahman and Commerce Adviser Sk Bashir Uddin are expected to join the last-ditch negotiations as they are staying in the USA to deal with the tariff issue. Commerce Secretary Mahbubur Rahman is supposed to fly for Washington and join the crucial meeting.

Contacted Tuesday, the commerce secretary said, "The commerce adviser confirmed us that the US has given Bangladesh time for July 9, 2025 to discuss the tariff issue."

Replying to a question, Mr. Rahman said "we have received a new draft agreement which totally different than previously received draft sent by the US administration.

He, however, said "we will have to work for fixing the Bangladesh position on the tariff issue and draft agreement."

Replying to another question on the new draft agreement, he said Bangladesh's exporters have to follow standard of the U.S. Food and Drug Administration (FDA) in exporting different items to the US market. Besides, necessary certification would be required in exporting pharmaceutical items.

He also mentioned that Bangladesh's RMG is now under "general tariff line". He wouldn't elaborate.

The National Security Adviser and the Commerce Adviser of Bangladesh already had a meeting with the United States Trade Representative (USTR) representatives on July 3. The meeting ended without decision.

On April 02, the Trump Administration announced the imposition of reciprocal tariffs on all US trading partners. Bangladesh currently pays an average of 15 per cent in tariffs on exports to the US market. The Trump administration announced an additional tariff of 37 per cent, bringing the total to a prohibitively steep 52 per cent.

After the levying of reciprocal tariffs, Chief Adviser of Bangladesh interim government and other nations wrote to the US administration to postpone the punitive tariffs that touched off global trade jitters.

The commerce adviser also wrote to the USTR outlining Bangladesh's trade action plans and commitments in greater detail in order to leapfrog the impending crisis.

"Considering that US buyers can try to pass the tax burden on to Bangladeshi exporters, and likewise, Bangladeshi exporters may try to shift the burden on to U.S. buyers, there is a risk that U.S. buyers may divert orders to countries with lower tariff exposure, potentially undermining Bangladesh's position as world's second-largest RMG exporter," Bangladesh Foreign Trade Institute (BFTI) feared in its previous report.

The BFTI is also worried that Bangladesh's economy may face significant disruptions unless the challenges posed by reciprocal tariffs are addressed through trade negotiations and diversification of export markets.

An official of IIT wing under commerce ministry has informed that the US wants to export aircraft, more cotton, food-grains, LNG, military hardware etc in their bid to bridge the trade gap against Washington.

The Bangladesh government has made a move to purchase aircraft and wheat from the developed nation. Besides, it plans to request the local private traders to import more items, including cotton and wheat, from the USA.

The United States is Bangladesh's largest single-country export destination, accounting for 17.09 per cent of total exports as of FY 2023-24, according to the Export Promotion Bureau (EPB).

Bangladesh's top export to the US is ready-made garments, which currently faces most-favoured-nation (MFN) tariff rate of 11.8 per cent on knitwear and 9.91 per cent on woven garments.

Analysts make a point that despite nearly three months of back-and-forth communications, Bangladesh couldn't secure a breakthrough in trade negotiations with the United States, raising concerns among industry leaders about the consequences of failing to get the 35- percent reciprocal tariffs on Bangladeshi exports.

According to Masrur Reaz, founder-chairman of Policy Exchange Bangladesh, the government initiated several steps -- such as document exchanges and dialogue rounds -- to address the tariff issue. However, he described the outcome as "very disappointing".

"We've seen the government take various initiatives, but when the tariff remains fixed at 35 percent, it clearly shows we have failed to convince the US," says Reaz.

"Trade offers alone are not enough -- there are political dimensions that we've perhaps underestimated."

He notes that the government seemed unaware of the latest correspondence from President Trump, pointing to a potential diplomatic gap.

"We may have a shortfall in our political engagement with the US, and without building relations with Trump's core political groups, trade deals alone won't yield results," Reaz says, urging the government to take action during the remaining three weeks before the tariffs are enforced.

Shams Mahmud, Managing Director of Shasha Denim Ltd, criticizes government's negotiation approach, calling it a "missed opportunity" compared to Vietnam's success in having reduced its tariffs to 20 percent.

"Our negotiation team lacked representation from key industry associations such as BGMEA, BKMEA, and BTMA -- that's a major blind spot," observes Mahmud.

"In contrast, Vietnam took a firm stance on transshipment and leveraged its Chinese-backed investment profile, something Bangladesh does not have."

He points out most Bangladeshi businesses are locally owned, which should have been presented as a strategic strength to the U.S. administration.

The businessman still finds a chance remaining to renegotiate. "But the government must offer a roadmap showing how U.S. businesses can expand in Bangladesh to help narrow the trade gap. Tariff reduction alone won't be enough."

Echoing similar concerns, Kutubuddin Ahmed, founder of Envoy Textiles, says the outlook remains bleak as the tariff was cut only slightly -- from 37 to 35 per cent.

"If we are unable to bring it down further, international buyers will squeeze their prices to offset the tariff burden, making it harder for us to do business," he says about the possible domino effect of jacked-up tariffs on trade.

BKMEA President Mohammad Hatem also confirms that Bangladesh was granted a three-week extension to conclude a deal. "From August 1, the U.S. will begin imposing the reciprocal tariff unless a deal is finalised. The July 7 notice gives us a new window. We hope to reach an agreement within this period."

In response to criticisms, Commerce Secretary Md Mahbubur Rahman denies any inaction from the government side.

"It would be wrong to say we've been inactive or less proactive," Rahman told The Financial Express. "Since the tariffs were announced, our Chief Adviser, Trade Adviser, and I have all engaged directly -- through letters, five rounds of meetings, and constant communication."

He says the government submitted four versions of a draft framework agreement and had been actively negotiating since April 02.

However, Rahman acknowledges getting outwitted by an abrupt development. "We hadn't anticipated receiving the 35-percent-tariff letter yesterday, especially when meetings were already scheduled for this week. We finally received the full agreement document only this morning-without the schedules, we couldn't negotiate meaningfully before."

Rahman reaffirms government commitment to reaching a deal within the remaining time. "We're in the middle of the negotiation, and we're pursuing the best possible outcome. Our focus is clear: reduce the tariff and protect our existing trade relationship with the United States."

Finance Adviser Dr Salehuddin Ahmed thinks the 35-percent reciprocal tariffs on Bangladeshi products is not justified as trade gap between the two countries is not big.

"It is true that our trade deficit is only $5.0 billion while Vietnam has deficit of $125 billion. The U.S. has agreed to provide them big concession. While our deficit is small, there is no justification for slapping high duty on us," the adviser told newsmen Tuesday after a meeting of Advisers' Council Committee on Government Purchase at the secretariat.

Mr Ahmed, however, notes that the rate announced by the United States is not final one and has scope to renegotiate in a meeting to be held on Wednesday morning.

He said the tariff will be fixed through one-to-one negotiation. The meeting will be held at the office of the United States Trade Representative between officials of the two countries.

Asked whether he is hopeful of a positive outcome from the meeting, the adviser replied affirmatively. "We will take next steps based on the meeting outcome."

Replying to a query about Vietnam's success in bringing down reciprocal tariffs by 26 per cent while for Bangladesh the tariff slashed only 2.0 per cent, Mr Ahmed said the negotiation was "okay".

But, at the same time, he points out, Vietnam's trade deficit with the U.S. was $125 billion while Bangladesh's deficit was only $5.0 billion. What they did is take some blanket measures. For China the tariff is totally separate while for 14 other countries, the matter is same. "We will negotiate."

Replying to a query on revenue collection in the last fiscal year, the adviser said the generation was modest and the gap was not big. "Next year, we will try to raise collection by changing system instead of imposing additional tax and value-added tax."

Mr Ahmed hopes next year there will be no leakage in tax collection. The officials would not be able to make underhand dealings with the businessmen. "Our tax capacity is good but we could not utilise it, thus the collection is little bit short," he said.

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