Bangladesh should not rely entirely on Trump's tariff war

With the Trump administration’s new tariffs coming into effect, major trading nations are adjusting their trade policies to manage anticipated volatility.  

So far, Trump has imposed a 25% tariff on Mexican imports and all Canadian goods, except for a 10% tariff on Canadian energy exports to the U.S. Regarding Chinese imports, the administration has added a 10% duty, bringing the total tariff rate to 35%, as a 25% tariff had already been imposed during Trump's previous tenure.  

In response, China has imposed retaliatory tariffs on $14 billion worth of U.S. goods and has also lodged a complaint with the World Trade Organization (WTO) over the increased tariffs on Chinese exports. Trump has also indicated in media interviews that he plans to impose similar tariffs on imports from the European Union (EU).  

While Trump's tariff policies may benefit Bangladesh in the short term, the country should not rely solely on these advantages. Instead, it must rethink its trade strategy to ensure long-term economic sustainability. Beyond the tariff war, Bangladesh faces another crucial challenge—its graduation from Least Developed Country (LDC) status in November 2026. This transition will result in the loss of preferential trade benefits, leading to higher export tariffs, potentially averaging between 10% and 12%. Currently, 78% of Bangladesh’s total exports benefit from LDC-related advantages, with 38 countries granting zero or reduced tariffs. After graduation, Bangladesh risks losing up to $8 billion in exports unless it secures preferential trade agreements (PTAs) and Generalized System of Preferences (GSP) Plus facilities.  

However, Bangladesh’s preparedness remains insufficient. Despite lobbying efforts, it has failed to secure Free Trade Agreements (FTAs) with major trading partners, managing only a PTA with Bhutan, which has minimal impact. Some progress has been made in negotiating an Economic Partnership Agreement (EPA) with Japan, with a deal expected by late 2025. However, talks on the much-discussed Comprehensive Economic Partnership Agreement (CEPA) with India have stalled since August last year, as have FTA discussions with Indonesia, Malaysia, and Turkey. Efforts to join regional trade blocs such as the Association of Southeast Asian Nations (ASEAN) and the China-led Regional Comprehensive Economic Partnership (RCEP) have also lost momentum.  

Given the slow progress in bilateral trade agreements, Bangladesh continues to rely on the multilateral trading system under the WTO. However, this system faces uncertainty due to Trump’s tariff policies. To mitigate risks, Bangladesh should prioritize securing bilateral FTAs, EPAs, and CEPAs while strengthening regional trade partnerships.  

Tariff rationalization has been a recurring topic for Bangladesh over the past decade. Experts argue that reducing excessive tariff protection—currently averaging 28%—is necessary for global competitiveness. The existing high tariffs have shielded domestic manufacturers from global competition, allowing them to benefit from protectionist policies without meeting stringent compliance standards. This has contributed to the lack of export diversification, with the apparel sector accounting for over 80% of total exports.  

Bangladesh must move forward without depending solely on U.S. tariff measures, as global trade could slow down due to rising prices and weakened demand caused by increased tariffs worldwide. While some countries and regional trade blocs have committed to extending preferential trade benefits post-LDC graduation, these benefits come with limitations. The EU has pledged to maintain trade privileges for three years (until 2029), while the UK, Australia, and Canada will continue offering trade benefits but with stricter conditions.  

Ultimately, Bangladesh must proactively navigate these challenges by reassessing its trade policies and strengthening its position in the global supply chain. The goal should be to minimize disruptions and ensure long-term economic resilience.