US–Bangladesh Deal on Tariff: Short-term Success, Long-term Introspection

On 1 August 2025, it was reported that the United States (US) agreed to impose 20% tariff on imports from Bangladesh.

Initially, the US had announced its intention to impose 37% tariff on Bangladeshi products, but after careful negotiations, Dhaka has managed to convince Washington to reduce the proposed tariff by 17%. The Bangladeshi government, as well as stakeholders in the ready-made garments (RMG) industry, views the US–Bangladeshi deal as a diplomatic success, and rightly so.

RMG exports constituted approximately 84% of Bangladesh’s total export earnings in Fiscal Year 2023–2024, and the US represents the single largest market for Bangladeshi RMG products. Through the export of RMG products, Bangladesh earns much-needed hard currency, keeps its economy afloat, and employs more than 5 million workers. Hence, the possibility of 37% tariff on Bangladeshi products in the US had caused panic in the country. However, after fruitful negotiations, the tariff has been reduced, and Bangladesh’s competitors in the RMG sector have received deals from the US which are either the same (between 19% and 20% tariffs on Vietnam, Indonesia, Pakistan, and Sri Lanka) or worse (25% tariff on India). So, even after the imposition of tariffs, Bangladeshi RMG products are likely to remain competitive in the US market. So, Bangladeshi policymakers are justified in claiming that it was a diplomatic success for the country.

However, the situation has to be viewed within the broader context. The US, once a bastion of isolation in the Americas, emerged as one of the two superpowers in the aftermath of the Second World War. The emergence of the US as a superpower was facilitated by a number of factors, including the extreme devastation in Europe and Japan caused by the World War, the acceptance of the Bretton Woods system by Western European great powers, and massive industrial expansion in the US in wartime. In 1950, 60% of the world’s total industrial production took place in the US. The replacement of the Bretton Woods system with the petro-dollar arrangement, coupled with the political-ideological defeat of Communism in 1990–1991, propelled the US to the position of the only superpower in the world.

At that time, the US exerted hegemony over the globe. The post-Second World War US was a ‘benign hegemon’ because numerous allies and partners of the US benefited considerably from the US-led global economic and financial system. For instance, US allies West Germany and Japan, destroyed during the World War, achieved a rapid economic recovery in the 1950s and 1960s, first owing to the infusion of US aid under the Marshall Plan, and then due to unfettered access to the US market. On its part, Bangladesh has maintained cordial relations with both the US and its rivals China and Russia, yet it was accorded nearly unfettered access to the US market until now.

However, a hegemonic power cannot preserve its hegemony for an indefinite period of time, as other contenders inevitably rise and challenge the hegemon. In the 21^st century, US hegemony is being increasingly challenged by the rise of China, the resurgence of Russia, and the economic strengthening of several states in the Global South. If the US wants to maintain its economic competitiveness and preserve its hegemony, it cannot afford to continue providing its allies and partners with the facilities it previously provided. So, the US is trying to restore its economic competitiveness through other means, illustrated by its push for the hypothetical annexation of Canada, the seizure of Greenland from Denmark, and the immense economic pressure exerted on the European Union (EU). Similarly, Bangladesh can hardly expect the new US to be as accommodating as it was earlier.

The US under the Donald Trump Administration is currently trying to reduce its $1.3 trillion trade deficit, and it is using tariffs to compel countries to purchase more products from the US. Bangladesh secured the reduction of tariff through similar concessionary deals. The Bangladeshi Ministry of Food signed an agreement to purchase 700,000 tons of wheat from the US annually, and the Cabinet Committee on Government Purchase greenlit the import of additional 220,000 tons of US wheat at slightly higher-than-market rate. Moreover, the Meghna Group concluded a deal to import $130 million worth soybeans from the US, while other Bangladeshi companies struck deals to import cotton worth $30–35 million. In addition, Bangladesh has agreed in principle to purchase 25 Boeing aircrafts, import liquefied natural gas (LNG) from US firms, acquire US cotton through government warehouses, and reduce tariff on US products.

Under the prevailing circumstances, Bangladesh had few good options, and from a short-term point of view, Dhaka did a good job in negotiating the deal with the US. The deal has reduced tariffs on Bangladeshi products, secured the competitiveness of its RMG sector, protected its economy from possible external shocks, and prevented potential socio-political unrest in the country.

However, Dhaka must view the situation with long-term considerations in mind.

First, so far, Bangladesh has carefully avoided being entangled into geopolitical confrontation in the Indian Ocean, and maintained good relations with both Washington and Beijing. But under the changed circumstances, Washington is likely to continue the use of its economic leverage over Dhaka to extract concessions in not only economic sectors but also political and strategic spheres. Dhaka should prepare for such a scenario.

Second, Dhaka should maintain cordial relations with Washington, irrespective of the nature of the latter’s government, to avoid further coercion. At the same time, Dhaka should enhance its economic ties with other countries, including the member-states of the EU and the Association of Southeast Asian Nations (ASEAN).

Finally, overdependence on a single industry has resulted in the current predicament, and it is clear that the failure to diversify the economy is detrimental to not only the country’s economic interests but also its political independence and strategic sovereignty. Hence, the country must develop other industrial sectors and look for new markets for its RMG products.

On a final note, Dhaka has secured a reasonably good deal with the US to protect its RMG industry, its economic viability, and its social peace, and so it is an important diplomatic achievement for the country. At the same time, Bangladesh should prepare for further similar contingencies, diversify its export markets, and initiate a wave of new industrialization to lessen overdependence on the RMG sector.

[Md. Himel Rahman is Lecturer, Department of International Relations, Gopalganj Science and Technology University. His articles and op-eds have been published on numerous platforms, including The Interpreter, The Diplomat, Asia Times, South Asian Voices. The Daily Star, Dhaka Tribune, New Age, and Daily Sun.]

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