US tariff cut signals stronger, competitive trade ties with Bangladesh
The decision by the United States to reduce its reciprocal tariff rate for Bangladesh from 35% to 20% marks a significant step towards strengthening bilateral trade relations, officials here said, stressing the need for halving an effective diversified, competitive and tolerant trade strategy.
"Looking ahead, ensuring internal stability and proactive governmental measures will be key in maintaining competitiveness and fostering future growth," former director of Bangladesh Garment Manufacture and Exporters Association (BGMEA) Mohiuddin Rubel told UNB on Friday.
Rubel, also Additional Managing Director, Denim Expert Ltd and Managing Director, Bangladesh Apparel Exchange Ltd, said ptimism prevails for Bangladesh's trajectory, poised for continued advancement and resilience in the evolving economic landscape.
Chief Adviser Prof Muhammad Yunus has described the latest US decision as a "decisive diplomatic victory" and proudly congratulated the Bangladesh tariff negotiators on securing a landmark trade deal with the United States.
"The future of Bangladesh is undeniably bright. Today’s success stands as a powerful testament to the nation’s resilience and its bold vision for a stronger economy tomorrow," he said in an immediate reaction after the successful tariff negotiations with the United States.
By reducing the tariff to 20%, 17 points lower than anticipated, he said their negotiators have demonstrated remarkable strategic skills and unwavering commitment to safeguarding and advancing Bangladesh’s economic interests.
Prof Yunus said they have been working relentlessly since February and navigated successfully through a complex negotiating process involving tariff, non-tariff and national security matters.
"The agreement they negotiated preserves our comparative advantage, enhaces our access to the world's largest consumer market and safeguards our core national interests," he said in his message shared by Press Secretary Shafiqul Alam.
This achievement not only underscores Bangladesh’s rising strength on the global stage but also opens the door to greater opportunities, accelerated growth and lasting prosperity, Prof Yunus said.
Describing it as an "exciting development" in trade dynamics, Rubel said Bangladesh has adjusted its reciprocal tariff to 20%, positioning itself competitively against countries like Pakistan, Cambodia and Vietnam.
Notably, compared to India and China, which have higher tariffs, this move sets Bangladesh apart, potentially attracting business from China, the exporter thinks.
Despite potential short-term impacts on US sales due to increased retail prices, Rubel said, historical resilience suggests Bangladesh is primed for a long-term success.
Reflecting on the post-COVID economic landscape, Bangladesh's steadfast growth amidst global challenges is commendable.
"While short-term growth may vary amid global economic shifts, Bangladesh's strategic positioning and historical performance bode well for sustained progress," Rubel said.
An Opportunity and A Warning
Executive Director, South Asian Network on Economic Modeling (SANEM) Selim Raihan said while this reduction in the US countervailing duty rate is encouraging, it does not create a room for complacency or create room for complacency; rather, it is an opportunity and a warning at the same time.
"Bangladesh needs to take effective steps now to establish a diversified, competitive and tolerant trade strategy," he said.
The recent reduction in the US reciprocal tariff rate for Bangladesh, from 35% to 20%, is a welcome development for the country’s export sector, said the economist.
"This revision comes as part of a broader recalibration of the United States' reciprocal tariff framework, which appears to apply to many of its trading partners," Raihan said.
For instance, Sri Lanka’s rate has been lowered to 20% (from 30%), and Pakistan’s to 19% (from 29%). Bangladesh's other competitors like Vietnam and India face tariff rates of 20% and 25% respectively.
In this context, Bangladesh’s new tariff rate now aligns more closely with those of its key competitors in the US market, suggesting a reduced risk of trade diversion and a lower likelihood of significant disruption to its exports, particularly in the readymade garments sector.
A notable element of uncertainty, however, remains in the global trade landscape: the reciprocal tariff rate for China is yet to be finalised, Raihan said.
Given China’s central role in global manufacturing and its competitive overlap with Bangladesh in several export categories, the eventual US decision on China’s tariff rate will be pivotal in shaping future patterns of global trade.
"If China is subject to significantly higher tariffs, Bangladesh and other South and Southeast Asian exporters may see a shift in demand in their favour. Conversely, a more favorable rate for China could intensify competition," said the economist.
As such, the final terms for China will be critical in determining how trade flows realign in the months ahead, he said.
A Triumph for Interim Govt’s Approach
Former US diplomat Jon Danilowicz said the White House announcement of a 20% tariff rate for Bangladesh represents a "triumph" for the interim government’s approach to negotiations.
Further details of the bilateral agreement are likely forthcoming, he said.
Over the past four months, Danilowicz said the interim government and its lead negotiator, National Security Adviser Dr Khalilur Rahman, faced relentless attacks from multiple corners.
He said this despite the steady progress Bangladesh had made in strengthening the bilateral relationship since President Trump’s inauguration.
"Now that the negotiations have concluded with a positive result for both Bangladesh and the United States, I hope these critics are prepared to admit their errors," said the former US diplomat who served in Dhaka in the past.
With progress on the July Charter, an election date set to be announced, and positive news on the tariffs, he observed that this has been a good week for those who have Bangladesh’s best interests at heart.
Energy Adviser Fouzul Kabir Khan said from domestic price stability to successful tariff negotiations with the US, Commerce Advisor Sk Bashir Uddin has proved his mettle, to the dismay of naysayers.
We Negotiated Carefully
“We negotiated carefully to ensure that our commitments aligned with our national interests and capacity,” said Khalilur Rahman, Bangladesh’s lead negotiator.
“Protecting our apparel industry was a top priority, but we also focused our purchase commitments on US agricultural products. This supports our food security goals and fosters goodwill with U.S. farming states," he said.
“We’ve also preserved our global competitiveness and opened up new opportunities to access the world's largest consumer market” Dr Rahman added.
The government has placed an order to purchase 25 aircraft from Boeing with a plan to increase wheat and soybean import from the United States.
“We remain engaged with the US. We have placed an order for purchasing 25 aircraft from Boeing. India and Vietnam each placed an order for 100 aircraft while Indonesia has placed an order for 50 aircraft from Boeing,” Commerce Secretary Mahbubur Rahman told reporters on July 27.
He said Bangladesh needs some aircraft within the next couple of years and hopes to get a few as national carrier Biman Bangladesh Airlines needs to expand its fleet.
For weeks, President Donald Trump was promising the world economy would change on Friday with his new tariffs in place. It was an ironclad deadline, administration officials assured the public.
But when Trump signed the order Thursday night imposing new tariffs on 68 countries and the European Union, the start date of the punishing import taxes was pushed back seven days so that the tariff schedule could be updated.
The change, according to AP, while potentially welcome news to countries that had not yet reached a deal with the US - injected a new dose of uncertainty for consumers and businesses still wondering what’s going to happen and when.