A Serious Challenge for Bangladesh’s RMG Industry
Bangladesh’s garment industry is facing one of its most serious challenges in decades as the United States has announced a 35 percent additional tariff on all Bangladeshi exports, effective from August 2025.
This decision could push the total tariff burden for Bangladeshi apparel exports to over 50 percent when existing duties and compliance costs are taken into account. Such an increase poses a significant threat to a sector that contributes more than 84 percent of Bangladesh’s total export earnings.
$7.34 Billion in US Exports at Stake
Last year, Bangladesh exported approximately 7.34 billion dollars worth of ready-made garments to the United States, representing around one fifth of the country’s total apparel exports.
A basic sweater currently priced at an average FOB of $ 5.50 per piece would face an additional cost of nearly $1.93 per piece under the new tariff. For an industry already operating on tight margins, this increase would result in significant losses of orders and revenue.
Analysts estimate that the new tariff could immediately reduce Bangladesh’s annual exports to the United States by at least 2 to 3 billion dollars with buyers shifting their sourcing to other countries.
Competitors Are Better Positioned
Competitor countries are in a stronger position under the new scenario:
- Vietnam faces only a 20 percent tariff on apparel exports to the United States, giving it a cost advantage of about 15 percent over Bangladesh.
- India faces a 26 percent tariff and is actively negotiating trade agreements to potentially lower this rate further.
- Although China faces the highest tariffs from the United States, it maintains significant capabilities in high-value apparel, man-made fibers, and technical textiles. While Bangladesh remains cost-competitive with China for many basic garments, this advantage could disappear without timely diversification.
Diversification Cannot Wait
Bangladesh cannot replace lost US orders overnight. Developing new markets and introducing new products takes significant time and investment. Yet the urgency for diversification has never been clearer given the potential revenue losses at stake.
The European Union
The European Union remains Bangladesh’s largest alternative market. In 2024, the European Union imported over 180 billion dollars worth of garments, but Bangladesh secured only around 19 billion dollars of that total, capturing about 10.5 to 11 percent of the market. Despite this foothold, European buyers are aware of Bangladesh’s vulnerability and are likely to negotiate harder, potentially driving prices down and compressing margins. To expand its share, Bangladesh must focus on product innovation, sustainability, and supply chain flexibility to justify higher prices.
The Middle East (GCC)
The Middle East, especially the Gulf Cooperation Council region, has an apparel import market valued at approximately 30 billion dollars annually. However, Bangladesh’s exports to this region amounted to only about 2 billion dollars last year, reflecting a modest 7 percent market share.
This limited penetration indicates the need for targeted market research, enhanced branding, and partnerships with regional distributors and brands, particularly to cater to niche demands such as modest fashion.
Emerging Markets: Africa and East Asia
Emerging markets like Africa and East Asia offer significant potential but remain small for Bangladesh’s apparel exports. For example, South Korea imports about 13 billion dollars worth of apparel annually, yet Bangladesh exports only around 500 million dollars to Korea, representing just 3.8 percent of Korea’s import demand.
This low share results from Bangladesh’s limited presence in higher-value segments and man-made fiber products, which are increasingly important in these markets. To perform better, Bangladesh must invest in design, trend analysis, and advanced manufacturing technologies.
A Strategic Response Is Essential
Diversification is no longer optional; it is crucial for survival. Several steps must be prioritized immediately.
Strengthen Value Proposition
Bangladesh must redefine itself not only as a low-cost producer but also as a reliable partner committed to sustainability and ethical practices. Buyers worldwide increasingly demand transparency, traceability, and compliance with standards such as the European Union’s Digital Product Passport and human rights regulations.
Financial Sector Support
Transitioning factories toward new products and processes requires substantial investment. Banks and financial institutions need to offer affordable financing, flexible credit terms, and support for costs related to sustainability and product diversification.
Diplomatic Engagement
Bangladesh cannot face this tariff crisis in isolation. The BGMEA must work closely with the government, trade diplomats, and industry leaders to engage with the United States.
Key strategies should include promoting Bangladesh as an investment destination for U.S. textile and apparel companies, increasing imports of U.S. cotton, technology, and machinery, and positioning Bangladesh as a regional hub for U.S. brands seeking to serve South Asia, the Middle East, and Africa.
Such diplomatic efforts could help secure tariff relief and establish Bangladesh as a trusted alternative to China in global supply chains.
China Plus One Remains an Opportunity
Despite the tariff shock, Bangladesh still has an opportunity within the global China Plus One strategy. Many brands are moving production away from China due to geopolitical tensions and rising costs. If Bangladesh can enhance its products and value proposition, it stands a strong chance of capturing some of this shifting demand, especially in mid-tier and basic apparel segments where it remains cost-competitive.
Bangladesh’s apparel industry has grown through resilience and adaptability. Now, it must act decisively to ensure new trade barriers do not undermine the significant progress made over the past decades.
By Abrar Hossain Sayem, President, BAYLA | Director, Sayem Fashions Ltd.
