Bangladesh Inks 19% Reciprocal Tariff Deal with United States, Gains Textile Exemptions
In a significant trade development, Bangladesh has successfully negotiated a reciprocal tariff agreement with the United States, securing a 19% rate while obtaining exemptions for textiles and garments manufactured using American materials. This agreement, finalized on Monday, marks a strategic move in bilateral trade relations between the two nations.
Comparative Analysis with Indian Export Landscape
Indian apparel exporters are closely monitoring the details of this agreement, particularly after recent market fluctuations affected some stocks. However, industry leaders express minimal concern about the potential competitive implications. The reduction in Bangladesh's reciprocal tariff from 20% to 19% creates a wider price differential compared to India's 18% rate, primarily due to Bangladesh's lower wage costs.
Industry experts highlight several factors that mitigate the perceived advantage for Bangladesh:
- The exemption from reciprocal tariffs for garments made with US cotton and man-made fiber involves substantial transportation costs
- Bangladesh's spinning industry around Dhaka lacks competitive efficiency
- Global trade predominantly utilizes man-made fibers rather than cotton
Industry Perspectives and Market Realities
Premal H Udani, Chairman and Managing Director of Kaytee Corporation, noted that Bangladesh's textile sector "was struggling until a few months ago" and emphasized that "we do not have much reason to worry" given global trade preferences for man-made fibers.
Industry estimates reveal that cotton constitutes approximately 20% of overall production costs, meaning the duty benefit applies only to this component. Pallab Banerjee, Managing Director and Group President of Pearl Global Industries, advised caution, stating, "Let's wait for the fine print. It doesn't look alarming."
Strategic Opportunities for Indian Exporters
Udani pointed to emerging opportunities for Indian exporters, noting that "many international buyers are looking to diversify their sourcing" amid political uncertainty in Bangladesh. This diversification trend could benefit India's apparel export sector significantly.
A Sakthivel, Chairman of the Apparel Export Promotion Council, expressed confidence in India's position, stating, "There is nothing to worry, we have got a good deal from the US. In fact, even for India cotton for re-export can be considered for concessions, if there is a 20% value addition."
Trade Research Insights and Export Structure Analysis
According to trade research body GTRI, Bangladesh exported 63% of its over $50 billion garment production to Europe in 2024, with only about 15% destined for the United States market. The research organization provided detailed tariff calculations:
- A Bangladeshi garment typically faces a 12% US Most Favored Nation (MFN) tariff
- With the new agreement, this would total 31% (12% MFN + 19% reciprocal)
- For India, the comparable total would be approximately 30% (12% MFN + 18% reciprocal)
- Bangladeshi garments using US fibers would pay only the 12% MFN tariff
GTRI concluded that despite apparent concessions, "Bangladesh's export structure and its heavy dependence on non-US textile inputs mean the arrangement is likely to result in only a limited increase in garment exports to the US."
Bangladesh's Trade Concessions to Secure Agreement
The agreement required Bangladesh to make substantial concessions to the United States, including:
- Opening its market to US machinery, chemicals, and energy goods
- Providing access for American soy, dairy, beef, and cotton products
- Committing to purchase approximately $3.5 billion worth of US farm products, energy, and aircraft
This comprehensive trade package demonstrates the complex negotiations involved in securing preferential tariff arrangements with major economic partners like the United States.
