Could our RMG industry withstand effects of new US tariff?

Bangladesh's export-oriented garment industry is facing new and significant challenges due to recent developments in U.S. trade policy. As one of the country's top foreign currency earners, any threat to this sector could have a ripple effect across the broader economy. A substantial portion of Bangladesh's exports-especially ready-made garments (RMG)-goes to the United States. Now, a sharp increase in U.S. tariffs, from the existing 15% to 37%, poses serious concerns among stakeholders.

Over the past decade, trade between Bangladesh and the U.S. has heavily favored Bangladesh. Bangladesh exports nearly four times more to the U.S. than it imports. Despite this, Bangladeshi products, particularly garments, have continued to face a 15% average tariff. The latest policy change by the U.S. administration adds to that, significantly increasing the burden on Bangladeshi exporters.

The U.S. remains the single largest destination for Bangladeshi apparel, accounting for 17-18% of total garment exports. In 2024, apparel exports to the U.S. rose by 0.73% to $7.34 billion. Export volume also increased by 4.86%. However, this growth in quantity has not been matched by a rise in earnings, as U.S. buyers have driven down prices by 3.8-7.7%.

According to the U.S. Census Bureau, Bangladeshi exports to the U.S. have increased by $25 billion over the past decade, while imports from the U.S. have only grown by around $12.5 billion. In 2024 alone, Bangladesh exported goods worth $8.36 billion to the U.S., while importing only $2.21 billion, resulting in a trade surplus of $6.15 billion in Bangladesh's favor.

Beyond the tariff hike, domestic challenges are compounding the crisis. Bangladesh's industrial sector, particularly the garment industry, is facing severe energy shortages. Factories are receiving 30% less gas than needed. The impact of this gas crisis has disrupted production, and February 2025 saw a 42% drop in export purchase orders-the sharpest decline in 14 months.

The political instability following the change of government last August led to widespread labor unrest in major industrial zones around Dhaka. Factory shutdowns followed, with many foreign buyers pulling out due to uncertainty. Issues such as weak law enforcement and recurring worker protests further eroded confidence in the sector.