Bangladesh should not solely on Trump tariff war

The Trump administration’s new tariffs have started coming into effect and the major trading countries have started realigning their trade policy anticipating volatility.

So far, Trump has imposed 25 percent tariff on import of Mexican goods and 25 percent on import of all Canadian goods except 10 percent on Canadian energy to the USA.

In case of Chinese goods, the Trump administration has imposed 10 percent additional duty and now the effective rate is 35 percent as Trump levied 25 percent on Chinese goods in his last tenure as the US president.

China also imposed retaliatory duty on import of US goods.

However, this time China lodged complaint seeking remedy of imposing higher tariff on import of Chinese goods to the World Trade Organisation (WTO) and also China also imposed retaliatory duty on import of $14 billion worth of goods from the USA.

Trump is also planning to impose similar duty on import of goods from the European Union (EU) as well as he told this intention in different media interviews recently.

So far, the Trump’s latest tariff war indicates that Bangladesh will benefit as his policies are favourable for us.

But Bangladesh should not just rely on the benefits arising out of tariff wars. It should also rethink a trade policy for its sustainable business and economy. Because, here, we should mention that apart from the Trump’s tariff war, there has been another important development, which is graduating into a middle-income country, which will set off the high tariff threshold for exports. The average duty may be between 10 and 12 percent once the country graduates in November 2026.

Now, of the total exports, 78 percent is LDC induced and 38 countries are allowing zero duty or lower duty benefit to Bangladesh as an LDC.

After the LDC graduation, Bangladesh may lose $8 billion worth of export if appropriate measures are not taken in time. These can include GSP Plus facilities and trade deals.

In this case, Bangladesh’s preparedness is still very low. For instance, Bangladesh could not sign any major trade deal with any major trading partner for preferential trade benefit that will protect its trade even after Bangladesh’s graduation.

Bangladesh could sign only a Preferential Trade Agreement (PTA) with Bhutan which is insignificant. Despite lobbying with nearly a dozen trading partners, Bangladesh has not been able to sign any Free Trade Agreement (FTA).

There has only been some progress with Japan for signing the bilateral Economic Partnership Agreement (EPA) and a deal is expected by end of 2025.

Moreover, the progress of signing the much talked about Comprehensive Economic Partnership Agreement (CEPA) with India has almost stopped since August last year.

Similarly, the progress of signing of FTAs with Indonesia, Malaysia and Turkey and the progress of joining with the trade blocs such as Association of South East Asian Nations (ASEAN) and China led largest trade agreement of the world Regional Comprehensive Economic Partnership (RCEP) has also come to a halt since August.

Not having been able to make much headway on bilateral deals, Bangladesh mainly depends on the multilateral trading system under the WTO. But that has come under threat with Trump tariffs. As a remedy, bilateral FTAs or EPAs or CEPAs along with a stronger regional trading system is expected.

So, Bangladesh should also rethink and reposition its trade policy to be a stronger player in global supply chain or global value chain to remain a better performer and a better player.

Tariff rationalisation has been a buzzword for Bangladesh over the last decade as experts think Bangladesh needs to be competitive in global trade easing tariff protectionism, because the average duty at 28 percent is too protective.

These highly protective measures have created opportunities in the domestic markets where manufacturers are happy to exploit the tariff protection that in a way exempts them from the mandatory stringent compliance standards.

This is one of the major reasons that Bangladesh has not been able to develop or diversify its export sector other than apparels which accounts for more than 80 percent.

Bangladesh should also move forward without solely depending on the US tariff measures because the global trade may face a standstill with rising prices triggered by low demand due to the higher global tariffs.

So far, only a few countries and regional trade blocs promised to continue preferential trade benefits for Bangladesh after the LDC graduation.

The EU promised to allow it for three years up to 2029 as it does to graduating LDCs. The UK, Australia and Canada will continue the preferential trade benefit for a certain period, but with a lot of stringent conditions.

However, Bangladesh will still have to forge its path to navigate this course keeping the turbulence as low as possible.