Trump's tariffs an opportunity for Bangladesh to reduce trade deficit, diversify exports

By Md. Abu Saim*  

U.S. President Donald Trump’s administration imposed a 37% tariff on Bangladeshi exports to the United States but granted a 90-day exemption as part of a temporary easing of trade restrictions for several countries. This provides Bangladesh with a critical window to reassess its trade policies and address its reliance on the U.S., which accounts for a significant portion of its export revenue. 

The tariff primarily affects Bangladesh’s ready-made garment sector, which generates over 90% of the country’s foreign exchange earnings from the U.S. and employs approximately four million people. A sudden imposition of the tariff could disrupt employment, foreign currency reserves, and economic stability. The exemption offers temporary relief but underscores the need for Bangladesh to reduce its trade deficit with the U.S. and mitigate risks associated with dependence on a single market.

In response, Bangladesh, through Professor Yunus’s diplomatic efforts, has proposed measures to align with U.S. trade interests and address the trade imbalance, which stood at $8.4 billion in exports to the U.S. versus $2.2 billion in imports in 2024. These measures include increasing imports of U.S. agricultural products like cotton, wheat, corn, and soybean, establishing a duty-free bonded warehouse for U.S. cotton, implementing a zero-tariff policy on U.S. scrap metals and agricultural imports, gradually reducing tariffs on U.S. goods such as gas turbines, semiconductors, and medical equipment from 70–74% to 45–50%, eliminating non-tariff barriers like complex testing and packaging requirements, and facilitating U.S. tech sector entry, notably through the launch of Starlink in Bangladesh. These steps aim to strengthen bilateral trade relations and encourage the U.S. to lower the proposed tariff to 15–25%.

The U.S. has cited its trade deficit with Bangladesh as a key concern, viewing it as a challenge to national interests amid protectionist policies. Bangladesh’s commitment to reducing the deficit through increased U.S. imports and tariff reductions could foster reciprocity but poses domestic challenges. Lowering tariffs may lead to government revenue losses and heightened competition for local producers, requiring careful balancing of domestic and international priorities. Additionally, Bangladesh’s reliance on U.S. trade policies highlights the risks of political trade dependence, where external policy shifts can significantly impact the economy.

Bangladesh’s heavy reliance on the ready-made garment sector and the U.S. market increases its vulnerability to global trade fluctuations. To enhance resilience, the country is exploring diversification into ICT and semiconductors by leveraging a young, tech-savvy workforce to develop software, outsourcing, and semiconductor industries; expanding into high-margin services like customer support, virtual assistance, and educational services; promoting labor-intensive sectors such as leather goods, handicrafts, ceramics, and light engineering tools to absorb workers and reduce garment dependence; and developing homegrown brands to increase the value of exports through investments in design and digital marketing.

To implement these strategies, Bangladesh must undertake structural reforms, including strengthening export credit and insurance systems to support new industries, investing in education and skills training for ICT and service sectors, upgrading port and logistics infrastructure to meet global standards, and formulating a national trade diversification strategy with clear targets. The introduction of Starlink and openness to collaboration in civil aviation and defense sectors signal a shift toward high-value, technology-driven partnerships, potentially reducing reliance on commodity exports.

The U.S. tariff and subsequent exemption highlight Bangladesh’s exposure to external trade pressures due to its concentrated export sector and market reliance. The 90-day window provides an opportunity to implement strategic reforms, reduce the trade deficit, and diversify exports. By addressing structural challenges and pursuing new trade avenues, Bangladesh can enhance its economic resilience and position itself for sustainable growth in a dynamic global trade environment.

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*Formerly with the Dhaka University