July 10, 2025
DHAKA – Smaller Asian nations, including Bangladesh, have been hit with some of the most punitive duties under the Trump administration’s tariff policy. The official justification for these tariffs was to correct what the administration called unfair trade deficits, where countries export more to the United States than they import.
However, analysts widely question the merit of using trade deficit calculations, suggesting the tariff move was a pretext for a broader geopolitical strategy to punish China. The US appears to have targeted countries that rely on or receive substantial investment from China.
Bangladesh is one of those nations that face pressure from Washington to decouple their manufacturing industries from Chinese suppliers, according to officials familiar with trade negotiations.
The threat forces Bangladesh into a near-impossible choice between its largest customer and its biggest supplier, pulling the nation directly into the fallout of the US-China trade war.
President Donald Trump has imposed a steep 35 percent tariff on Bangladeshi goods, primarily due to the high concentration of Chinese inputs in products manufactured here and exported to the United States, according to officials. The move reflects Washington’s broader strategy to counter China’s economic influence, they said.
In fiscal 2023-24, Bangladesh’s imports from China amounted to $16.63 billion, representing 26.4 percent of its total import bill, according to Bangladesh Bank data. Over 80 percent of these imports consist of raw materials for the garment sector, including fabrics, chemicals and accessories.
This dependency is at the heart of the trade friction. The US is proposing stringent Rules of Origin (RoO) that would require 40 percent local value addition for products to qualify for American markets.
Commerce Secretary Mahbubur Rahman acknowledged last week that the US proposal on RoO presents a significant challenge for Bangladesh, as it requires a high threshold for local value-addition.
The pressure is most acute on the woven garment sector, which is the larger portion of Bangladesh’s apparel exports to the US. Industry insiders said that nearly 70 percent of the woven fabric needed for items like trousers and shirts, destined mainly for American consumers, is imported from China.
This contrasts sharply with the knitwear sector, where local spinners can supply nearly 90 percent of the required fabric, thus having a much lower dependency on Chinese imports.
This data underscores the woven sector’s vulnerability. In the first 11 months of fiscal 2024-25, the US imported $4.62 billion worth of woven garments from Bangladesh, compared with $2.4 billion in knitwear, according to data from the Export Promotion Bureau.
“The terms and conditions of the US value addition are stringent and almost impossible for Bangladesh to comply with,” said Masrur Reaz, chairman of the Policy Exchange, a Dhaka-based think-tank.
Mostafa Abid Khan, a former member of the Bangladesh Trade and Tariff Commission, echoed his view, saying higher US value-addition requirements will put pressure on Bangladesh’s woven sector.
Washington’s demands extend beyond value addition. US negotiators have pushed Bangladesh to align its tariff system with American geopolitical interests, proposing lower tariffs on countries favoured by the US and higher tariffs on those subject to higher American levies.
This directly challenges Bangladesh’s adherence to the World Trade Organisation’s Most Favoured Nation (MFN) principle, which ensures non-discriminatory trade by applying the same tariff rates to all member countries.
Faced with difficult proposals, Dhaka has attempted a conciliatory approach. Unable to agree on the tough RoO and tariff alignment, Bangladeshi negotiators have instead offered to increase imports of American goods to narrow the trade gap, which is currently about $6 billion in Bangladesh’s favour. To entice US negotiators, Dhaka offered a package of concessions that included purchasing more American LNG and agricultural products, such as cotton and soybeans, and increasing orders for Boeing aircraft.
The negotiations also reflect broader US security and investment concerns. Bangladeshi officials said US negotiators sought assurances regarding the security of American investments and cited the recent increase in Chinese capital flowing into Bangladesh. They also raised reservations about growing Chinese ownership in local industrial units and pointed to perceived weaknesses in Bangladesh’s policy regulations, intellectual property laws, and labour rights.
Industry leaders are sounding the alarm over the potential fallout. Anwar-Ul-Alam Chowdhury, chairman of the Evince Group, a major garment exporter, said meeting a 40 percent value-addition requirement on products made from Chinese fabric is “almost impossible”.
Furthermore, there is a growing fear of an additional “transshipment” tariff. Chowdhury worries that the Trump administration could apply a broad definition of transshipment, similar to the 40 percent duty imposed on Vietnam for goods deemed to be rerouted from China. “Trump may think every product imported from China and manufactured in Bangladesh and exported to the US is a transshipped product,” he said.
As the second round of meetings is scheduled for July 9-11 in Washington, Bangladesh’s garment industry is navigating an uncertain future in the US market.
Mahmud Hasan Khan, president of the Bangladesh Garment Manufacturers and Exporters Association, has sought an urgent appointment with the chief adviser of the interim government to press for the appointment of lobbyist firms to negotiate directly with the Trump administration.
The negotiations are not solely about trade and commerce but are intrinsically linked to international politics and strategy, said Masrur Reaz. He highlighted Bangladesh’s deep reliance on Chinese suppliers, adding, “Bangladesh cannot ignore the Chinese product concentration overnight, even if it wants to.”