A turning point for Bangladesh

This is where economic diplomacy comes knocking on the door of the strongman; the recent initiative by the United States (US) to lower tariffs on key Bangladeshi exports is a ringing endorsement of the magic that is possible with good leadership and true negotiating. No usual policy shift by any measure, this is a watershed moment — a living rebalancing of trade relations between a new South Asian economy and the world’s economic powerhouse. It arrives at a crucial moment when Bangladesh is capitalising on its economic achievement, broadening the base of its export-based economy, and charting a future beyond Least Developed Country (LDC) status.

This achievement — the work of Nobel Laureate and Chief Adviser Dr Muhammad Yunus — is more than a smart business deal. It is a historic shift in Bangladesh’s economic diplomacy towards the world, founded on moral leadership, strategic thinking, and fact-based activism. His leadership awakened Bangladesh’s mission to rally the US as a confident, reform-minded, and forward-looking partner committed to sustainable and inclusive development.

SCOPE AND SIGNIFICANCE OF THE TARIFF CUT: The tariff cut recently negotiated by the United States with Bangladesh is a historical bilateral trade relationship realignment and a strategic and ambitious policy action by the United States Trade Representative (USTR). Targeted at significant Bangladeshi export sectors — such as ready-made garments (RMG), textiles, jute goods, leather products, and some agro-based products — this action is far from mere symbolic goodwill. It offers real, measurable benefits with the potential to initiate export growth, contribute positively to the job situation, and strengthen Bangladesh’s position in international trade.

The treaty possesses several desirable characteristics. Perhaps most significantly, it imposes tariff reductions between 5 per cent and 18 per cent across more than 300 lines of goods, thus improving the price competitiveness of Bangladeshi exports in the US market. The accord also includes the reinstatement and partial reinstatement of Generalised System of Preferences (GSP) privileges, which had been revoked in 2013 due to compliance problems with labour. The reinstatement follows the improvement in labour rights, occupational safety, and sustainability in Bangladesh. Apart from this, the agreement also promises additional incentives to women-owned businesses and green-certified producers, allowing these to have duty-free or significantly reduced access to US markets and thus facilitate Bangladesh’s compliance with inclusive and ethical levels of trade.

The economic implications of such an occurrence would be widespread. Based on the estimates of the Export Promotion Bureau (EPB) and Bangladesh Bank, the tariff cut can bring $2.5 billion to $3.2 billion in extra export earnings in the initial three years. This bonanza will create up to 1.2 million direct jobs, predominantly in the RMG and textile sectors, and another 2 million indirect jobs, predominantly for women workers and the rural population as part of the supply chain system.
Further, the anticipated export earnings’ boost will contribute an additional $3 billion to Bangladesh’s foreign exchange reservoir, thereby strengthening the country’s current account balance, supporting the stability of the Taka, and easing burdens on the import price and public purse. These are well-timed benefits for Bangladesh as it is likely to encounter international economic headwinds, higher energy prices, and the requirement of practicing fiscal discipline during post-pandemic recovery.

Macroeconomically, the change would be likely to contribute 0.4 to 0.6 percentage points to gross domestic product (GDP) growth per year because of enhanced export performance and sectoral spillovers. Besides direct trade effects, the agreement will have positive spillovers in major supporting sectors such as logistics, transportation, ICT services, and finance since increased demand necessitates better infrastructure, digitalisation, and financial services.

REGIONAL COMPARISON: Bangladesh’s success in securing a welcome tariff reduction from the US is in striking contrast to the experience of other players in the region. While other South Asian economies are bogged down in going in circles, diplomacy, or internal politicking, Bangladesh has emerged as a model of purpose, reformist engagement, and normative diplomacy. A closer look at the comparative experience — specifically the experiences of India, Pakistan, Sri Lanka, and Vietnam — shows why Bangladesh succeeded where others have not.

India: Strategic Stalemate in Trade Diplomacy

India, the region’s biggest economy, has had several chronic trade differences with the US mainly because of protectionism, regulatory overhang, and market access barriers. In 2019, the US withdrew India’s GSP status, listing unresolved trade differences on digital services, agriculture, and renewable energy.

Also contributing to tensions are India’s hard-line positions on patent protections of drugs and e-commerce regulations limiting foreign competition, which have heightened tensions with US trade and business officials. Indian exports of textiles, clothing, and footwear now enjoy higher effective tariff rates than Bangladeshi exports following the recent accord. India’s less flexible federal system and lower trade negotiation flexibility have limited its capacity to be accommodating, and Bangladesh has the opportunity to benefit from being a more accommodating and reformist partner.

Pakistan: Security-Oriented, Not Trade-Oriented

During most of its recent history, Pakistan’s relationship with America has been characterised by security and strategic ties, rather than sustained trade and economic restructuring. While these have helped Pakistan to receive preferential treatment in defence, they have not managed to fuel sustainable trade dividends. Sustained economic instability in recent years, combined with swollen debt inventories and fiscal indiscipline, has considerably undermined Pakistan’s bargaining leverage.
Even with Washington lobbying, there has been minimal progress in gaining tariff concessions. This has been added to by IMF-imposed austerity and political crisis, both of which have undermined American stakeholder faith in Pakistan’s business and investment climate. Bangladesh was the contrast — against all change in the political background — making a strong pitch based on economic solidity, good government, and a clear reform vision, gaining credibility where Pakistan fell short.

Sri Lanka: Lost Trade Opportunities during Crisis

Sri Lanka is the story of unfulfilled trade opportunities during an economic and political breakdown. As a plague hit Sri Lanka in the form of a debt-to-GDP ratio of more than 120 per cent, hyperinflation, and a plummeting currency, trade preference losses accelerated with an unprecedented intensity. Disruption of the EU GSP-plus also limited access to huge markets. Simultaneously, the reality that no current trade discussion exists with the United States is a pointer to the absence of a strategic leaning towards economic renaissance via trade diplomacy.

Vietnam: A Role Model and Strategic Parallel

Among the rising economies, Vietnam is a global leader in export-led growth and multilateral trade integration. With 15 Free Trade Agreements (FTAs) under negotiation, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), Vietnam has become a global leader in garment, electronics, and high-value manufacturing.

Two-way commerce between the US and Vietnam totalled more than $120 billion in 2023, evidence of the strength of their trading relationship. Value chain integration, stability of regulation, and neutrality politically are Vietnam’s secrets to success, which instill confidence among foreign investors and trading partners. Where Bangladesh has fallen behind Vietnam in size and integration, it has used a rival comparative advantage — of reducing poverty, empowering women, and enjoying a world reputation for socially responsible and sustainable manufacturing.

BANGLADESH’S COMPARATIVE ADVANTAGE: The Bangladesh-US bilateral trade encompasses a diverse range of goods and services, driving the industrialisation of Bangladesh, enhancing public health, ensuring food security, facilitating digitalization, and advancing infrastructure development. Imposing these imports — many of which are critical to Bangladesh’s growth horizon — a uniform 20 per cent tariff can lead to broad price hikes, reduced availability, and supply chain collapse. Below is a categorised overview of such strategic imports:

Food and Agricultural Products

Bangladesh relies on US exports to supply its food and agriculture processing industries. To name a few, soybean meal and soybean oil are the linchpin imports for the manufacture of edible oil and animal feed, while cereal grains and wheat are the pillars in food security and the milling sector. Cotton, being the prime raw material of Bangladesh’s RMG sector, is the backbone of textile production. On the other hand, dairy products (i.e., powdered milk, cheese) and US processed food products meet the demands of an emerging urban consumer base.

Industrial Machinery and Equipment

For maintaining competitiveness in the international market, Bangladesh also imports sophisticated industrial machinery from the US, including textile machinery for spinning and dyeing, agro-hardware for intensive agriculture, and food processing factories that facilitate agro-industrial production to be intensified. Packaging, automation, and robotics systems — used in pharmaceuticals, FMCG, and manufacturing — also constitute a key component of this trade flow.

Energy and Chemicals

As the energy demand grows, Bangladesh imports finished petroleum products like aviation fuel and premium lubricants from the US. Liquefied Natural Gas (LNG) is also imported for power production and industrial consumption. Chemical reagents, solvents, and fertilisers, which are crucial in the pharmaceutical, textile, and agricultural industries, are also imported by Bangladesh.

Pharmaceuticals and Medical Devices

Bangladesh imports patented life-saving US drugs, including oncology drugs, biologics, and vaccines, that are not available in Bangladesh. Medical diagnostic supplies, surgical equipment, and hospital-level implants are imported from the US, elevating healthcare capacity and quality of care, especially in cities.

Information and Communication Technology (ICT)

To power its expanding digital economy, Bangladesh depends on US exports of enterprise management software, cloud computing services, cybersecurity solutions, and software licenses. It needs imports of semiconductors, microchips, servers, and telecommunication equipment to support improvement in Bangladesh’s technology infrastructure and innovation environments.

Aerospace and Defence Equipment

For the defence and aviation sector, Bangladesh imports maintenance equipment and aircraft spares for civilian (e.g., Biman Bangladesh Airlines) and military applications. Radar equipment, navigational aids, and secure communication devices are also imported under diplomatic and defence cooperation.

Education and Professional Services

America contributes to Bangladesh’s education and institutional development by exporting consulting services in law, engineering, IT, governance, and STEM lab equipment, educational databases, and digital learning solutions that are crucial for Bangladesh’s universities and research institutions’ building capacity and learning based on innovation.

Luxury and Consumer Goods

Bangladesh’s urban affluent continue to import higher and higher percentages of branded clothing, electronics, and home appliances from US firms. Apple, Dell, HP, Whirlpool brands, and car brands such as Ford, GM, and Tesla products are imported, primarily for the upper middle class, foreign diplomats, and institutional buyers.

STRATEGIC IMBROGLIO: To begin with, a blanket 20 per cent tariff on all types of US imports can raise the cost of goods and services for Bangladeshi consumers and enterprises. Ranging from farm inputs such as soybean oil and wheat to life-saving medicines and advanced medical equipment, the rising prices that result can disproportionately burden low-income households, health centres, and SMEs relying on these imports as business and competitiveness inputs. It can further slowdown the process of industrial modernisation, especially in sectors such as ICT, agro-processing, and textiles, which depend on the import of US-produced machinery, software, and parts to increase productivity as well as become globally competitive.

Secondly, it can discourage American companies from investing further in Bangladesh, especially regarding joint ventures, technology transfers, and capital investments. Multinational companies aiming to tap Bangladesh’s high-potential renewable energy, aviation, health technology, and digital infrastructure sectors may face high tariffs as an entry risk or a regulatory risk signal. This would reverse the pace of bilateral economic engagement that has picked up momentum since the US tariff relief for Bangladeshi exports.

Lastly, a blanket tariff can trigger a chain reaction of retaliatory or balancing trade measures, especially in sensitive sectors like ready-made garments (RMG), where Bangladesh still lobbies for further tariff concessions if the move is perceived as protectionist or bereft of the principles of reciprocity of trade. Otherwise, it will complicate further or ongoing trade talks with US trade negotiators, possibly undermining some of the goodwill that has been created due to Bangladesh’s demonstrated track record on labour rights, sustainability, and ethical sourcing.

Generally, while the 20 per cent tariff presents apparent difficulties, it also presents an opportunity for strategic rebalancing of trade, but as long as it is done carefully, ahead of negotiations, mutual prosperity, and the eventual promise of keeping Bangladesh on its path towards economic resilience and integration in the global economy.

LEADERSHIP MATTERS: The success of Bangladesh in negotiating tariff reductions from the US cannot be understood without the visionary leadership and revolutionary diplomacy of Nobel Peace Laureate Dr Muhammad Yunus. This achievement — a non-traditional trade adjustment and not a typical negotiating ploy — was facilitated through the acumen of Yunus in redefining the very terms of negotiation, converting what would otherwise have been a technocratic technical dispute into a strategic and ethical discourse on human development, economic equity, and shared global responsibility.
Rather than negotiating the tariff issue like a standard business concern, Yunus redefined trade as a means of social transformation, linking tariff relief to the empowerment of rural Bangladesh women, informal sector workers, and green businesses. His moral voice on the global stage, following decades of poverty struggles and advocating for ethical business practices, opened influential doors in Washington. U.S. senior senators, Congressional caucuses, and influential civil society leaders met the Bangladeshi delegation not only out of a sense of obligation, but also due to a shared admiration for the values for which it stood.

One of the central pillars of Yunus’s strategy was to underscore Bangladesh’s tangible improvements — especially in the wake of the Rana Plaza disaster. The mission was proud to point out the country’s remarkable advances in factory safety, workers’ rights, and environmental stewardship, citing its global leadership in green-certified garment factories. Fact, case studies, and third-party audits were deployed to support these assertions, further positioning Bangladesh as a reliable and forward-thinking trade partner.

Additionally, Yunus made shrewd forays into powerful U.S. policy constituencies beyond traditional diplomacy. Think tanks such as the Center for Strategic and International Studies (CSIS) and the Council on Foreign Relations (CFR) were brought on board to amplify Bangladesh’s voice in Washington think tanks, the media, and academia. These platforms facilitated perceptions to shift and the tariff question to be presented as one of moral global commerce and broad-based development, rather than a bilateral policy anomaly.

The bargaining effort wasn’t the work of one man — it was an integrated, multidisciplinary undertaking, coordinated with unusual clarity and purpose. Yunus was the leader of a competent and diverse negotiating team that comprised industry titans, seasoned trade attorneys, labour union organisers, and development economists. They spoke with one voice, articulating a national interest agenda that cut across bureaucratic silos and institutional turf wars.

Exports, Diversification, Value Addition, FDI: US tariff concession is a powerful incentive for export diversification and value addition in the Bangladesh economy. It offers a vital window of opportunity for the country to move away from the low-value garment production to higher margin, design-based, technologically advanced ready-made garment (RMG) products. This movement not only raises incomes per unit exported but positions Bangladesh in high-value world apparel markets.
Apart from this, the improved trading climate encourages the growth of sunrise industries such as agro-processing, light engineering, leather goods, ICT hardware, and pharmaceuticals. These industries, being promising but underdeveloped due to tariff protection and reduced international exposure, are now poised to link up with global value chains. The tariff incentives also encourage the formalisation of small and medium-sized firms (SMEs) because they lower the transaction costs in trade and promote conformity with international standards. Through formalization, SMEs get access to finance, technology partnerships, and new markets.

Tariff reductions are also clear evidence of trade stability, which will again position Bangladesh as a stable and competitive source of foreign direct investment (FDI). American companies, in fact, now have their sights set on joint ventures, subcontracting, and strategic alliances in Bangladesh’s Export Processing Zones (EPZs) and newly developed high-tech industrial parks.

Secondly, this amiable trade regime adds to the attraction of Bangladesh in the reshoring and supply chain diversification agenda at the international level. Under conditions of geopolitical instability and rising production costs in East Asia, especially China, multinational corporations are actively seeking new bases of production. Bangladesh, through this new US trade policy framework, now has a compelling value proposition of cost-competitiveness, human resources, and a reformist policy regime.

Labour Market and Rural Development: The benefits of this trade breakthrough extend far into the country’s job market, particularly in the RMG industry, which has employed millions of workers — many of whom are women. Improving market access and export will lead to better job quality, wage dynamics, and labor safety standards, further solidifying the sector as a force behind social mobility and women’s empowerment.

Furthermore, the new trade pact expands rural cooperatives’ and women’s businesses’ access to export, supported by digital platforms, e-commerce, and micro-manufacturing networks. Such an opening provides room for inclusive growth as well as pulls marginalized communities into the international economy, bridging the rural-urban divide.

Macroeconomic Stability: At the macro level, exports to the US will substantially boost foreign exchange revenues, which is imperative to stabilise the Bangladeshi Taka during high import prices and external debt repayment. With diversified export revenues on the rise, the country’s foreign exchange reserves will increase, hence boosting its overall fiscal resilience.

These inflows also relieve balance of payments pressure, allowing Bangladesh to become less dependent on remittances and concessional borrowing as foreign buffer sources against shocks. This, in turn, enhances economic sovereignty, lessens fiscal vulnerability, and allows the government to spend on long-run development with less dependency and greater confidence.
In short, the US tariff reduction is more than a trade win. More precisely, it is a strategic shift of structural clout toward fundamental structural change, releasing diversified growth, investment, inclusive jobs, and sustained macroeconomic stability.

RECOMMENDATION: To develop a healthy and future-oriented trade relationship with the United States, Bangladesh must pursue a proactive and strategy-based approach. Rather than viewing tariffs as fixed obstacles, Bangladesh must employ diplomatic means and economic diplomacy to redefine trade relationships in a manner that supports bilateral growth, stability, and innovation. The following policy directions are proposed to enable balanced, equitable, and future-oriented trade relationships:

Pursue Tariff Reductions on Strategic Imports

Bangladesh must initiate sectoral negotiations with US trade negotiators to reduce or eliminate tariffs on critical imports of the highest priority for Bangladesh’s industrial and social development. They include strategic imports such as cotton for the RMG sector, textile and food processing machinery, up-to-tech medical equipment, and pharmaceuticals. These are not luxury items but production enablers that facilitate employment, export earnings, and public health returns. Negotiation of tariff concessions on these inputs would lead to cost-effective production, price competitiveness, and improved service delivery directly.

Demand Inclusive Bilateral Trade Negotiations

Bangladesh must take its engagement with US trade and commerce representatives to the next level by insisting on systematic, regular bilateral trade negotiations. These sessions should focus on principles of reciprocity, sectoral exemption from tariffs, and predictable regulatory regimes. Through the provision of the Trade and Investment Framework Agreement (TIFA) or its equivalent, Bangladesh can institutionalize debate on the facilitation of trade, harmonization of standards, and resolution of conflicts. Additionally, joint economic councils or chambers of commerce should be added to continue encouraging private-sector involvement and confidence-building for American investors.

Encourage Technology Transfer and Co-Production Agreements

One of the most visionary measures Bangladesh can take is to accord the most significant priority to technology transfer and co-production agreements in high-impact sectors such as Information and Communication Technology (ICT), renewable energy, pharmaceuticals, and air transport. These partnerships reduce long-term dependence on imports as well as stimulate capacity building, employment creation, and innovation cultures. Bangladesh is poised to provide incentives — preferential land in SEZs, tax holidays, or intellectual property rights — to US firms willing to invest in local manufacturing, R&D, and training initiatives.

By interweaving these approaches — selective tariff talks, institutionalised trade dialogue, and strategic joint ventures — Bangladesh may safeguard its economic interests without compromising its commitment to fair, inclusive, and rules-based global commerce. These recommendations are framed to assist in ensuring that the partnership between Bangladesh and the United States continues to expand not only as a transactional relation but as a mutually enhancing, innovation-based partnership rooted in long-term development interests and shared prosperity.

Dr Serajul I Bhuiyan is Professor and Former Chair Department of Journalism and Mass Communications Savannah State University.
sibhuiyan@yahoo.com