Dhaka on ‘right path’ to secure US tariff cut
Dhaka on ‘right path’ to secure US tariff cut
Here’s a comprehensive, in-depth exploration of Dhaka’s efforts to secure a US tariff cut, analyzing the negotiation process, economic implications, and strategic considerations. This carefully cited discussion is structured for depth and clarity, and spans across multiple dimensions.
1. Background & Current Status
In April 2025, the United States imposed a 35–37% “reciprocal tariff” on Bangladeshi exports—one of the highest rates globally—citing a significant bilateral trade imbalance What followed were emergency responses, high-level government letters, and trade diplomacy aimed at mitigating its impact.
Formal U.S. Tariff Announcement & Immediate Fallout
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On April 2–7, Donald Trump’s administration announced tariffs ranging from 35% to 37% on Bangladeshi products, invoking a formula based on relative tariffs and trade deficits
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Bangladesh’s caretaker administration, led by Muhammad Yunus, officially appealed to the U.S. to defer the tariff implementation by three months, highlighting the country's active pursuit of trade policy reforms.
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As reported by Reuters, the Bangladeshi government showcased initiatives to increase imports from the United States—such as LNG, cotton, wheat, corn, and soybeans—in what many view as a strategic gesture to strengthen its negotiating position.
Early Economic Disruptions & Trade Ripple Effects
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Numerous US-based buyers, including Walmart and Levi’s, began delaying or canceling orders; one Reuters report cited nearly 1 million swim-shorts shipments being paused
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Garment manufacturers in Bangladesh—responsible for 10% of the country’s GDP and 80% of its export earnings—have cautioned that the tariff could severely reduce export volumes and undermine their already narrow profit margins.
2. Dhaka’s Strategic Response: Diplomacy, Concessions & Countermeasures
Dhaka’s response has been multi-pronged, combining diplomatic engagement, trade concessions, targeted agreements, and inter-ministerial coordination.
Diplomatic Outreach
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Yunus personally penned a letter requesting a three-month window, during which Bangladesh aimed to ramp up its purchases of American goods.
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Multiple delegations made two rounds of negotiations in Washington, led by Commerce Adviser Sk. Bashir Uddin, with key participation from National Security Adviser and inter-ministerial officials
Trade Concessions & Imports from the US
Bangladesh offered a suite of incentives to ease Washington’s concerns over trade imbalance:
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Pledged duty-free or reduced tariffs on U.S. goods—especially in agriculture, energy, aerospace, and high-tech
Forged a five-year Memorandum of Understanding (MoU) for importing 700,000 tonnes of U.S. wheat annually, aiming to pares the USD 6 billion trade deficit .
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Advanced agreements for cotton, soybeans, pulses, Boeing aircraft, LNG, and potentially Starlink satellite infrastructure
Domestic Coordination & Capacity Building
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A five-and-a-half-hour inter-ministerial meeting reviewed offers and conditions, vetting trade, agricultural, infrastructure, defense, and customs policies .
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Bangladesh signals it will accept 40% local value-add conditions—aligned with US concerns—if matched by a tariff reduction from 35% to .
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Position papers and formal proposals are being finalized, including commitments for structural policy reform
3. Negotiation Phases & Timeline
Round One (Early April)
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Bangladesh requested a three-month deferment, communicated to Trump via Yunus’ letter.
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Initial bargaining emphasized expanding imports and simplifying non-tariff barriers to show willingness to “rebalance” the trade.
Round Two (Early–Mid July)
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A delegation led by Bashir Uddin met in Washington from July 9–11, covering ~80% of conditions.
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Still lacking agreement on 20% of issues—critical ones including local value-add and non-trade conditionalities .
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Bangladesh signaled readiness for value-add demands if tariff eased to about 15–20%
Round Three (Late July)
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Bangladesh submitted a formal position paper to USTR on or just before July 22, detailing its offers, policy adjustments, and the wheat deal .
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A third negotiation round was proposed for July 26, but scheduling depended on USTR response .
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As of July 24, Bashir Uddin confirmed an online meeting scheduled—reflecting urgency to strike before August 1 tariff activation
4. Why Dhaka Is Considered “On the Right Path”
According to Commerce Secretary and multiple government officials, progress has been “steady”, “constructive”, and heading in a promising direction
Key indicators include:
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Position papers and proposals were proactively submitted well before their respective deadlines.
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80% alignment reached in Round 2 on key terms .
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Significant bilateral trade packages, including wheat, cotton, Boeing deals, and bonded warehousing
Active inter-ministerial consensus, ensuring a unified government posture .
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Ready adaptation—e.g., online negotiation sessions, greater team inclusion, and flexible positions on contentious clauses
These coordinated, strategic moves reflect pragmatic trajectory—balancing concessional opening with insistence on preserving national interests.
5. Economic & Social Stakes
Garment Industry Risks
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.Contributing 10% to the national GDP, employing around 4 million people, and generating 80% of export earnings, this industry plays a vital role in Bangladesh's economy
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With average margins already slim, a new 35% duty threatens to re-route orders toward Vietnam, Jordan, Egypt, and Kenya—countries enjoying lower tariffs (10–20%) .
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Factories are postponing production; small-to-medium enterprises are particularly vulnerable
Rural & Broader Economic Impact
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Agreements on U.S. wheat, corn, and soybeans improve food security, rural purchasing power, and agricultural field planning .
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Duty relief on machinery and energy goods may enhance industrial efficiency and economic diversification .
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Increased U.S. investment in infrastructure and high-tech—such as Boeing aircraft and Starlink—contributes to upgrading logistics and connectivity .
Political & Strategic Benefits
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A successful settlement helps avert mass job losses, thus stabilizing domestic socio-political environment.
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Demonstrates interim leadership’s competence, fostering credibility ahead of anticipated electoral transitions.
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Deepens Bangladesh–U.S. bilateral engagement, signaling openness to long-term partnerships.
6. Outstanding Issues & Negotiation Hurdles
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Remaining 20% of negotiation terms unresolved—largely concerning Rules of Origin (40% local value-add) and unspecified non-trade conditions .
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U.S. demands may include non-trade conditionalities, but Dhaka firmly resists these —though Bangladesh is open to gradual compliance timelines (5–10 years).
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Tariff target uncertainty: Bangladesh is aiming to reduce from 35% to approximately 15–20%, aligning with tariff levels that Vietnam secured .
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Timeline pressure: If no agreement is reached by July 31, the 35% tariff will be formally enacted on August 1 .
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Global trade dynamics: Bangladesh must be vigilant of broader shifts—like U.S.–China or U.S.–EU trade tensions that might re-order global tariff norms.
8. Comprehensive Assessment: Is Dhaka on the Right Path?
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Diplomatic momentum: Continuous engagement, leading delegations, and timely position papers assert Bangladesh’s seriousness.
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Strategic concessions: Tasked with U.S.-facing trade incentives well-aligned to bilateral interests.
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Unified governance: Inter-ministerial cohesion demonstrates disciplined, coordinated statecraft.
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Responsive flex: Online meetings, scaling negotiating teams, and comfort with value-add compromise show adaptive readiness.
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Reality-based targets: Adopting ~20% tariff goals in line with successful models (i.e., Vietnam) is a prudent benchmark.
Conclusion: Dhaka is applying a smart, multilateral mix of economic incentives, domestic alignment, and realistic negotiation positions. While uncertainty remains around the final tariff rate and conditional structures, the momentum clearly places Bangladesh on the right path toward securing meaningful U.S. tariff relief—so long as the remaining hurdles are resolved before the August 1 deadline.
Policy Recommendations & Strategic Options
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Enhance negotiation team: Include BGMEA representatives and more technical experts for credibility and earlier buy-in.
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Flagship FTAs: Publicize the US wheat MoU, Boeing talks, bonded warehouse plans as evidence of Bangladesh’s reciprocal goodwill.
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Stay economically agile: Diversify export markets and expand staffing to ramp up EU/UK/regional orders.
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Accelerate value-chain readiness: Invest in garment-sector backward linkage, enabling Bangladesh to comply with anticipated Rules of Origin terms.
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Prepare legal contingency: Develop a WTO complaint strategy as a fallback in case of breakdown.
Nurture media relations: A transparent narrative highlighting trade diplomacy gains can reinforce domestic and international confidence.
