Share of Bangladesh's exports to the United States by tariff category in 2024. Source: RAPID
The Daily Star of Bangladesh published an article titled "Illusion of Advantage: U.S. 'Reciprocal' Tariffs and Bangladesh Exports" on October 1st, which stated that although the U.S. imposes lower tariffs on Bangladesh compared to China and India, under the impact of rising U.S. tariffs leading to weakened global demand and Bangladesh's impending loss of Least Developed Country (LDC) status, the challenges for Bangladesh's exports may actually intensify. Therefore, Bangladesh urgently needs to enhance its export competitiveness and promote diversification. The author of this article, Abdur Razzaque, is the chairman of the Center for Development Research and Policy Integration (RAPID).
The Trump administration imposed 30% and 50% tariffs respectively on China and India, while Bangladesh was in a relatively lower bracket of 20%. Some views argue that Bangladesh's exports to the U.S. will grow due to the "relative tariff advantage," but the reality is more complex. On one hand, the overall increase in U.S. tariffs could squeeze end-user demand. If the U.S. market shrinks overall, the relative gains of Bangladesh will be offset. On the other hand, the tax rates on some of Bangladesh's goods have actually increased. Previously, about 4% of Bangladesh's exports were duty-free, now they are subject to full 20% tariffs; approximately 53% of goods had their tax rates raised from 15%-20% to 35%-40%; and 12% of goods that previously paid over 25% tariffs now face 45%-60%.
Currently, the U.S. "reciprocal tariffs" have generated three effects. First, the tariffs are partially passed on to downstream retailers and consumers by importers, resulting in higher end prices. Importers often pay part of the tariff in advance, while forcing foreign suppliers to reduce prices to absorb some of the additional tax burden. This "squeeze net price" phenomenon is more pronounced in industries with low profit margins, and could even lead to supply disruptions.
Second, rising retail prices lead to market shrinkage. Affected by price increases and unstable supply, U.S. importers and consumers may become more cautious, leading to a contraction in the U.S. apparel market, reduced production scale, and decreased inventory. Exporters facing higher tariffs will lose space first, so even if Bangladesh has an advantage in nominal tax rates, its benefits may be offset by stricter bargaining and trade conditions.
Third, global competition is intensifying. Exporters losing the U.S. market will shift to the EU and other regions, causing oversupply and falling prices. RAPID reports that the U.S. apparel market may shrink by about 12% (approximately $10 billion), and Bangladesh's exports to the U.S. may fall by 14% (about $1.25 billion), with $1.08 billion coming from apparel exports. If U.S.-India negotiations proceed smoothly, and India obtains tariff preferences, the decline in Bangladesh's exports to the U.S. could expand to 18%. It is worth noting that even if Bangladesh holds an advantage in certain markets, it may be forced to accept declining profits to maintain market share. For example, Bangladesh's apparel exports to the EU are expected to grow by 2%, but only if prices are reduced.
Aside from the tariff impact, Bangladesh also faces pressure from the imminent loss of LDC status. To cope with the "double shock," Bangladesh must take measures to enhance its own export competitiveness. In the short term, Bangladesh can adopt temporary credit quotas, export refinancing, targeted marketing assistance, and other buffer measures. Long-term measures include: first, strengthening energy security, improving logistics efficiency, advancing port modernization, and perfecting a sustainable compliance system, while using industrial policies to enhance skills, introduce new technologies, and improve productivity. Second, expanding export markets, striving for GSP+ treatment from the EU, relaxing textile safeguard measures, and accelerating free trade agreement negotiations with Japan, integrating into the East Asian supply chain, and opening up more emerging markets. Third, promoting product upgrades and diversification, such as developing high-value-added products, expanding synthetic fiber exports, and developing non-apparel product exports, to reduce reliance on low-end cotton clothing. For this, the Bangladeshi government needs to encourage enterprises to invest more in quality, design, technology, and compliance aspects. Fourth, optimizing the tariff structure, reducing dependence on trade taxes, and strengthening investment incentives for export-oriented industries.
Original: https://www.toutiao.com/article/7557372781386596891/
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