The Emerging Landscape of Trade: Trump’s Tariff Policy and Its Implications for Bangladesh
On Sunday, 20 April 2025, an insightful panel discussion titled “The Emerging Landscape of Trade: Trump’s Tariff Policy and Its Implications for Bangladesh” was hosted by the Dacca Institute of Research and Analytics (daira). The discussion, moderated by Dr. Kazi Iqbal, brought together academics, policymakers, and trade specialists to discuss how global trade disruptions, notably those caused by former US President Donald Trump’s tariff policies, are affecting Bangladesh’s economic prospects. The session started with a discussion of the decline of the multilateral, rule-based trading system and the growing dominance of bilateral agreements and ad hoc tariff determinations. This trend, he contended, led to increased unpredictability, particularly in emerging economies such as Bangladesh.
Dr. Deen Islam commenced the discourse with a presentation titled “The Emerging Landscape of Trade: Trump’s Reciprocal Tariff and Its Implications for Bangladesh.” He acknowledged at the outset that in this economic conflict, Bangladesh is a diminutive nation in comparison to the USA. The reciprocal tariff is established by competitive forces. He emphasized the significance of commerce with the USA by stating that we export 8 billion annually to the USA, constituting 20% of our overall trade.
Prior to COVID-19, Bangladeshi exports to the US market amounted to 300-400 million USD each month. However, with the onset of the COVID-19 pandemic, it has increased to 600-700 million USD. Throughout the COVID-19 pandemic, the majority of factories worldwide were shuttered; nonetheless, Bangladesh maintained the output. This augmented the export percentage. The export increase of Bangladesh in the US market is 40% for this reason. However, the problem lies within the export portfolio. It is focused on the garment sector, comprising 90%. In the garment sector, Bangladesh possesses merely 5-6 items for export. Consequently, if any individual item is impacted, it will influence the trade. In the U.S. market, garment products yield barely 6-7% profit. If a 10% tariff is imposed on this sector, then the RMG industry will not be viable. In addition, we have the difficulty of the graduation of Least Developed Countries (LDCs).
Dr. Islam added that US trade and LDC graduation will also impact the European economy. Owing to elevated tariff rates, nations such as Vietnam and China will transition to the European market, as well as Canada and Japan. Furthermore, post-graduation from LDC, we will not receive any exclusive amenities in this market. Rather, the laws and regulations governing us will get more stringent.
It was also discussed in Dr. Islam’s presentation that the WTO’s rule-based trading system is under challenge due to Trump’s tariff policy. The departure of the US from the WTO (World Trade Organization) would exert pressure on the organization. The tariff imposed on the USA by any country is irrelevant. The tariff regime instituted by Trump is contingent upon the trade deficit. He employed the elasticity of substitution in calculating the trade deficit. This indicates the extent to which individuals or enterprises transition from purchasing a product in one country to acquiring it from another in response to price fluctuations. The literature review indicated a value of 1, but it has been amended to 0.25. This elevated the tariff’s worth. If the formula was applied correctly, the tariff would be reduced to one-fourth of the proposed amount.
Other competitors of Bangladesh are also encountering tariffs. Excluding Vietnam, the figures are lower for India and Pakistan. In the United States, the apparel market is valued at 80 billion USD, which is projected to decline by 12 to 14 billion USD. The product’s markup will decrease by 4-5%. This will impact our foreign reserves. If the RMG sector is impacted, our primary concern will shift to female employment.
In his final remarks, Dr. Deen Islam stated that Bangladesh must expedite action and implement a progressive trade plan. The nation must transcend dependence on RMG exports, emphasizing strategic trade diplomacy, structural changes, and innovation in the private sector. Furthermore, Bangladesh has to enhance port operations, minimize lead times, and investigate digital platforms for direct sales. Enhancing regional coalitions and investigating emerging areas such as Latin America and Africa are imperative. Proactivity will dictate whether Bangladesh progresses in the evolving global trade environment or lags behind.
Mamunur Rashid Askari, Joint Chief of the International Cooperation Division of the Bangladesh Trade and Tariff Commission, offered more insights based on his experience. He emphasized that least developed countries (LDCs) represent merely 1.12% of global commerce, as per World commerce Organization (WTO) figures. A USTR (U.S. Trade Representative) research indicates that enhancing trade facilitation may assist LDCs in increasing their trade share. He underscored the necessity for Bangladesh to diminish both product and market concentration. Adhering to 78% of WTO trade facilitation measures, Bangladesh may decrease its trade expenses by 14.3%.
He also noted that LDCs encounter dangers from tariff fluctuations; nonetheless, possibilities for growth exist if strategic measures are implemented. The transition from LDC status would provide a considerable challenge for Bangladesh, as it would forfeit access to several favorable trade agreements.
Subsequently, he stated that we may elevate the USA to the status of the most favored nation by decreasing its tariff rate. However, the WTO will not endorse this. Furthermore, we must assess whether there is sufficient demand for US products in our country. He stated that to attract investment, we must become a complying member of the WTO. This will enhance the influx of investment in our nation.
Finally, Shams Mahmud, the former president of the Dhaka Chamber of Commerce and Industry, analyzed the current tumultuous scenario from a commercial standpoint. Initially, he indicated that there would be a spillover effect from the US-China trade conflict. China will relocate certain industries to nations such as Bangladesh. This will yield increased export revenue for Bangladesh. However, the trade deficit with the United States will expand. This may also elevate the tariff.
Mahmud stated that we cannot indiscriminately transition to US-produced cotton. Due to the non-homogeneous nature of cotton, varieties from different nations possess distinct characteristics. U.S. cotton is unsuitable for specific products, like dark-hued apparel. Owing to the elevated tax, exporters will relocate to the European Union, Canada, Japan, and several other nations. This will also enhance competition. Moreover, this will exert an inflationary influence on the US market as well. Prices will increase and demand will decrease. This will generate surplus capacity in our factories, necessitating the provision of discounts. When a discount is offered, an immediate price increase is not feasible. However, he referenced certain matters that we may negotiate with the USA. He stated that we import a generator from Singapore and a Caterpillar from Dubai. However, both companies are based in the United States and possess warehouses in these countries. He inquired about the possibility of establishing a representative office of the USA in Bangladesh, which would be beneficial.
Mahmud asserted that the graduation of LDCs will pose a greater problem than Trump’s tariffs. He inquired if Bangladesh’s financial sector is prepared for the impending changes post-graduation. He emphasized that following LDC graduation, the European Union, Canada, and similar nations will demand a green transformation. Concerning which we are deficient. He stated that if we commence now, this shift will require ten years.
He also interrogated the government’s recent escalation of gas prices for emerging industries. He stated that this will deter individuals. He expressed his apprehension regarding the substantial jacket and suit industry. The new tariff may result in the loss of market share for these two products. He subsequently remarked that we are discussing the prior 15% tariff. However, this represented the weighted average. For certain products, we also imposed a 36% tariff.
The discussion also elaborated on the logistical difficulties confronting Bangladesh, noting that Vietnam’s infrastructure enables it to manage tariff-related expenses more efficiently. Bangladesh exhibits deficiencies in port efficiency, resulting in elevated expenses. He also noted that air cargo expenses had increased as a result of modifications in the pricing structure. The civil aviation authorities have already established this pricing. However, it is now dictated by the airline industry. They raise the price at their discretion. Conversely, India continues to uphold lower pricing owing to civil aviation regulations. He stated that, as a result of the tariff battle, the prices of coal and LNG will decline.
In reaction to port inefficiencies, Mamun-ur-Rashid Askari stated that the government is endeavoring to consolidate all trading processes into a single digital platform, hence enhancing efficiency. Nonetheless, further efforts are required in aspects of the trade process.
Shams Mahmud stated that the government has implemented another policy detrimental to the garment business. Historically, Bangladesh imported the requisite amount of cotton from the cotton warehouses of India. Similar to two trucks, five trucks. However, this facility is currently suspended. Cotton must be transported via cargo ships. We must import a substantial quantity of cotton simultaneously. We lack sufficient capacity to store them. One positive development is that the American cotton sector is establishing warehouses in Bangladesh.
In the concluding segment of his address, he stated that the government had successfully reinstated confidence in the banking sector. He stated that governmental and commercial enterprises must conduct additional market research. Africa established the largest free trade zone. This market is currently seeing growth. China, India, and Turkey are already proceeding there. We must investigate this market.
He then provided an example indicating that the Philippine chicken fry franchise Jollibee generates an annual revenue of 4.71 billion. However, we do not develop our local brands for international expansion. Freshwater fish represent an additional export opportunity. The export of freshwater fish in Thailand surged by 1500%. We must establish a free trade pact with several nations. Our mud crab is exported to Japan, Singapore, and Thailand as Sri Lankan crab due to the necessity of transshipment through these countries. India exports our fruits for the same reason.
In his concluding remarks, Dr. Kazi Iqbal underscored the necessity for Bangladesh to identify methods to reduce tariffs via proficient trade negotiations. The nation necessitates a comprehensive industrial policy and assistance for domestic industries to maintain competitiveness in the changing trade environment. He advocated for the establishment of manufacturing sectors, such as the automobile industry. Such shocks provide the opportunity to undertake this action.
Key Recommendations for Bangladesh:
- Bangladesh needs to act fast and adopt a forward-looking trade strategy.
- The country should move beyond relying solely on RMG exports.
- Bangladesh must focus on smart trade diplomacy, structural reforms, and innovation within the private sector.
- Improve port handling, reduce lead times, and explore digital platforms for direct sales.
- Strengthen regional blocs and explore new markets like Latin America and Africa.
- Reduce both product and market concentration to minimize risk.
- Follow 78% of WTO trade facilitation measures to reduce trade costs by 14.3%.
- Make Bangladesh a compliant nation of the WTO to attract more investment.
- Set up a representative office for the USA in Bangladesh to improve trade and import conditions.
- Start the green transition immediately, as it may take ten years to meet post-graduation requirements.
- Explore free trade agreements with other countries to support export diversification.
- Promote local brands and export potential items like freshwater fish, mud crab, and fruits.