Bangladesh can benefit from a tariff below 20% on RMG exports to the US if at least 20% American cotton is used, said President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA Mahmud Hasan Khan, citing a clause in the Trump administration’s executive order.
According to the clause, the reciprocal tariff won’t apply on the value of the US raw materials used in goods being shipped to the US market, if they cross 20 percent threshold, he explained at a press conference at Uttara BGMEA building on Saturday.
Currently, 75 percent of the garments exported from Bangladesh are cotton-based items, the BGMEA president, adding that Bangladesh currently imports US cotton worth $500 million, which can easily be raised to $2bn to get a reduced tariff.
On Thursday, the Trump administration issued an executive order, slashing the tariff rate to 20 percent on Bangladeshi goods from 35 percent proposed earlier after a series of trade talks.
However, the apex trade body of the apparel exporters clarified that the effective tariff rate on the export of garment items from Bangladesh to the US will be 36.5 percent, including a 20 percent reciprocal tariff on top of an existing 16.5 percent duty.
The BGMEA President warned against complacency, noting that the US executive order indicates ongoing trade and security negotiations with other countries. “If those talks are finalized, their tariffs might be further reduced,” he said. “So Bangladesh must continue diplomatic engagement.”
He thanked the US government for adopting what he called a more balanced tariff structure. The revised 20% rate puts Bangladesh in a better position compared to key competitors—such as China, which now faces a 30% tariff, and India at 25%.
This development, Khan said, is the result of months of difficult diplomacy. He praised the interim government’s trade and security advisors for their leadership during the negotiations, which he said helped Bangladesh avoid a major trade disruption.
The issue began on April 2, when the US introduced its “Liberation Day Tariff,” initially imposing a 37% duty on Bangladeshi exports. In comparison, India faced 26%, Indonesia 32%, and Pakistan 30%.
With 87% of Bangladesh’s US exports consisting of garments—and the US market contributing 20% of Bangladesh’s total export earnings—the steep tariff posed a serious threat.
Although the new tariff was originally set to take effect from April 9, it was postponed for 90 days. During this time, a 10% base tariff was applied starting April 5. This delay gave Bangladesh some breathing room for negotiations.
In early July, it was announced that Vietnam’s tariff had been reduced from 46% to 20%, while Bangladesh’s remained high at 35%. This created further anxiety among Bangladeshi exporters.
Fortunately, further talks continued. By July 31, Bangladesh secured a reduction to 20%, with countries like Indonesia and the Philippines settling slightly lower at 19%.
Khan said that although the private sector was not directly involved due to non-disclosure agreements, BGMEA did everything possible to support the government. The association provided analysis, met with stakeholders, and engaged with the US Embassy in Dhaka.
He warned that even with the reduced tariff, production costs will rise—posing particular challenges for small and medium-sized garment factories already struggling with high input prices.
Khan urged the government to monitor the situation closely and offer support to ensure that smaller businesses aren’t pushed out of the market.
He also called for long-term policy support, including improvements to customs processes, better port efficiency in Chattogram, and reliable electricity and gas supply for uninterrupted production. He concluded by expressing hope that, with coordinated efforts from the public and private sectors, Bangladesh’s export industry can remain strong amid global economic shifts.