On 2 June, the Office of the United States Trade Representative (USTR) proposed the imposition of additional tariffs on imports from 60 countries, including Bangladesh, under Section 301 of the Trade Act of 1974on the grounds that the targeted states have not undertaken adequate measures to curb forced labour. As a result, exports from Bangladesh to the US may face an additional 10% tariff, which would further reduce the competitiveness of Bangladeshi exports and negatively affect its already struggling economy. This has added a new complexity to the already complex dynamics of US-Bangladeshi trade relations.
The US is currently the 3rd largest trading partner for Bangladesh, after China and India. More importantly, Bangladesh faces chronic trade deficits with both China and India, however, it has consistently maintained a trade surplus with the US, making it a lucrative market for Bangladeshi exporters. The US is the single largest destination for Bangladesh’s exports, absorbing some 20% of the country’s exports, primarily ready-made garments (RMG). RMGs constitute more than 80% of Bangladesh’s total exports, and so retaining access to the US market is very important for the industry. While Bangladesh is not a principal trading partner for the US, the two states share a symbiotic trade partnership, with Bangladesh supplying comparatively cheap apparels for the US market and the US being a source of much required foreign exchange reserves.
The administration of President Donald Trump has made tariffs a cornerstone of US foreign and economic policy, insisting that the imposition of tariffs on the trading partners of the US would enhance US competitiveness, revive US manufacturing sector, and generate new jobs for US citizens. Accordingly, the Trump administration imposed tariffs on numerous states, including Bangladesh, on 2 April 2025. Initially, 37% tariffs were imposed on Bangladeshi goods, sending shockwaves across the Bangladeshi economic and political landscape. Afterwards, the US postponed the activation of the tariffs for three months. Later on 7 July, tariffs on Bangladeshi goods were reduced to 35%. After a series of negotiations, the tariffs were further reduced to 20% on 2 August, and the tariffs came into effect on 7 August.
On 9 February 2026, Dhaka and Washington signed the Agreement on Reciprocal Trade (ART). The agreement further reduced the US tariffs on Bangladeshi goods to 19%, and stipulated that no tariffs would be imposed on Bangladeshi RMG products which are made with US cotton and man-made fiber. However, in exchange, Bangladesh agreed to make significant concessions to the US. Under the agreement, Dhaka is supposed to import agricultural products, liquefied natural gas (LNG), and civilian aircrafts from the US. Moreover, the agreement restricts Bangladesh’s options by stipulating that Bangladesh is obligated to “adopt or maintain a complementary restrictive measure” to support US security actions and refrain from concluding agreements which use technical standards deemed “incompatible” with US standards. In effect, this would link Dhaka’s trade policy to US geopolitical conflicts, and grants the US a large measure of control over Dhaka’s economic partnerships with the wider world.
In addition, under the agreement, Dhaka has to support “multilateral adoption of a permanent moratorium” on customs duties on electronic transmissions at the World Trade Organization (WTO), accept the WTO Fisheries Subsidies Agreement “notwithstanding Article 12,” submit to the WTO a complete list of all subsidies it provides within six months, and allow all legal US agricultural biotech products to be imported and marketed in the country without any independent pre-market review, approvals, or additional labelling. This would effectively curtail many privileges which Bangladesh enjoys as a developing state, and involve it in several controversies, including the controversy over customs duties on electronic transmissions and the controversy over genetically modified organisms (GMOs).
The agreement has come under severe scrutiny in Bangladeshi policy circles. Meanwhile, the US Supreme Court ruled on 20 February that the tariffs imposed under the International Emergency Economic Powers Acts (IEEPA) are “unconstitutional.” Soon, however, the Trump administration imposed 10% tariffs on all states under Section 122 of the Trade Act of 1974, but tariffs would expire on 24 July, and in any case, the US Court of International Trade has declared these tariffs “illegal” as well. Accordingly, the Trump administration is now using concerns over forced labour to impose a new set of tariffs on numerous states, including Bangladesh.
Hence, it appears that Washington is determined to extract trade advantages from its trade partners by maintaining a tariff wall by any means. This places Bangladesh in a very delicate position as the country navigates a deep-rooted economic malaise amid recurrent global crises.
Without resorting to hyperbole or inflammatory rhetoric, Dhaka must navigate this acute issue with the view to protecting its political, economic, and strategic interests to the maximum extent possible.
First, under current economic circumstances, Bangladesh cannot afford losing access to the US market. Hence, it has no options but to accept the changed circumstances (i.e. tariffs on its exports). However, since terms of the Reciprocal Trade Agreement are disadvantageous to Dhaka, and they have the potential to harm the state’s diplomatic, economic, and strategic interests in the long run. Also, the scrapping of the initial tariffs by the US Supreme Court has effectively reversed the circumstances under which the agreement was signed. So, Dhaka should undertake necessary diplomatic measures to renegotiate the terms of the agreement and get a more favourable deal for the US.
Second, even though the initial19% tariff has been scrapped and the existing 10% tariff would expire in July, the USTR has prepared the ground for the imposition of 10% tariff on Bangladeshi goods over alleged concerns about forced labour. Bangladesh must undertake comprehensive measures, including frequent inspections, improved worker traceability, independent audits and verifications, and strengthened complaint mechanisms, to ensure that there is no forced labour in the country. Moreover, Dhaka should conduct negotiations with the USTR and demonstrate with evidence that it is sincerely implementing effective measures to curb forced labour in the country. By doing so, Dhaka should attempt to get the proposed tariff on Bangladesh removed altogether or at least reduced.
Third, Bangladesh should avoid a rhetorical conflict with the US over the issue, treat it as a technical rather than political matter, and utilize all channels of communication, direct and indirect, to reach an understanding with the US government.
Fourth, in the medium term, Bangladesh should diversify its export destinations, seek greater access to non-traditional markets for its RMG products, and gradually reduce its trade dependence on the US. These non-traditional markets include several states in the Asia-Pacific region, Eurasia, the Middle East, and Latin America, where demand for RMG products is rising.
Finally, in the long term, Bangladesh must diversify its industrial sector by increasing public investment and encouraging private investment in the build-up of new industries, and decrease its over-dependence on the RMG sector. The predominance of the RMG industry has been particularly helpful for stabilizing the country’s foreign exchange reserves and boosting its economic growth, but it has also unwittingly contributed to the stagnation of its industrial revolution. The country must build other light industries, and gradually move towards heavy industries.
In sum, Bangladesh must respond to the proposed US tariffs with pragmatism, restraint, and strategic foresight. While preserving access to the US market remains an immediate priority, Dhaka should seek to renegotiate unfavourable aspects of the Agreement on Reciprocal Trade, and demonstrate credible progress in eliminating forced labour through verifiable reforms. Simultaneously, it should avoid politicizing the dispute and instead pursue sustained diplomatic engagement with Washington. Over the medium and long term, Bangladesh must reduce its economic vulnerability by diversifying export destinations, broadening its industrial base, and strengthening its overall economic resilience in an increasingly uncertain global environment.
The writer is a Lecturer, Department of International Relations, Gopalganj Science and Technology University
