On June 3, 2026, Bangladesh awoke to a shocking headline: one of the largest export markets for Bangladesh’s RMG sector, the United States, had proposed an additional tax on its exports. Bangladesh’s leading export sector is the readymade garments sector, so the proposed provision will directly strike the key economic driver of Bangladesh. The obligation arises not for corruption, not for subsidies, but for supposedly failing to impose restrictions on imports of goods made with forced labor. Interestingly, the allegation stems from an issue we have been working on for years. In terms of compliance, Bangladesh’s readymade garments sector has set an exemplary model for others. This is not a simple abstraction, for a sector like RMG that employs over 4 million workers and earns approximately 84 percent of Bangladesh’s export revenue. It could be described as a structural threat layered on top of a 19 percent reciprocal tariff that has been in place since August 2025. Yet there is a hidden opportunity, buried in the same proposal, that could allow Bangladesh to transform a punitive action into a trade opportunity.
The US Proposal- What It Actually Implies
On March 12, 2026, the United States Trade Representative (USTR) initiated 60 investigations to determine whether the acts, policies and practices of various economies related to failure to impose and effectively enforce a prohibition on the importation of goods produced with forced labor are actionable under section 301 of the Trade Act of 1974, as amended (Trade Act). The investigation examined that the trading partner have imposed and enforced prohibitions on importing goods made with forced labor.
According to the USTR Section 301 Forced Labor Investigation, Bangladesh is listed among the countries facing a proposed 10 percent additional duty rate. This is due to accusations of failing to impose a legal prohibition on the importation of goods produced wholly or in part using forced labor, as well as failing to enforce such a prohibition effectively.
USTR proposed a two-tier tariff structure. Economies that have adopted a full or partial forced labor import prohibition, or have committed to one through an Agreement on Reciprocal Trade (ART), face an additional 10 percent duty. All other economies face 12.5 percent.
| Category | Examples | Rate (%) |
| ART Commitment/Partial prohibition | Bangladesh, Canada, UK, Cambodia, Pakistan | 10 |
| No prohibition or enforcement | China, India, Vietnam, Japan, Turkiye, South Korea | 12.5 |
The proposed tariff will be finalized after collecting the public comments by USTR on July 06, 2026, and hearing on July 7, 2026. So, there are options for modifying the rate before implementation.
Optimistically, Bangladesh’s inclusion in the lower-rate category is positive. USTR clearly recognized that the bilateral agreement signed between Bangladesh and USA in February 2026 secured it an advantageous tariff rate. However, USTR strongly focused on a distinction between a commitment to prohibit and an action by enacted law: “Commitment to take action in the future is distinct from forbidding legally the importation of forced labor goods.”
The Challenge for the Bangladesh RMG Sector
In the 2024-25 fiscal year, Bangladesh’s garments export to the United States was approximately $7.5 billion- roughly 20 percent of its total garments export. Bangladesh has established itself as a major supplier in the U.S. apparel market, alongside China and Vietnam, with a 10.53 percent share as of early 2026.
Bangladesh’s RMG sector employs over four million workers, the majority of whom are women, and earns foreign currency that reinforces the country’s macroeconomic stability. The USTR proposed that a 10 percent tariff will not be applied in isolation, but rather on top of the existing 19 percent reciprocal tariff. The potential cumulative additional tariff of 29 percent will undermine the sector’s cost competitiveness.
There is a risk that the orders could be shifted to other countries. Vietnam, Bangladesh’s nearest competitor, will face a 12.5 percent forced-labor tariff, compared with a 20 percent reciprocal tariff. Cambodia and Pakistan will face a 10 percent forced labor duty, the same as Bangladesh, in response to a 19 percent reciprocal tariff. The scenario could have a positive impact on our industry, as the tariff variation may enhance Bangladesh’s competitiveness in the U.S. market. However, the potential gain in competitiveness will be sustained if Bangladesh can ensure compliance, reliability, and timely shipment of the goods.
Bangladesh’s strongest stand is its cotton sourcing facts. In response to the U.S. Uyghur Forced Labor Prevention Act (UFLPA), Bangladeshi exporters are aware of U.S. customs detentions of products linked to Xinjiang cotton. The country has sourced raw cotton mostly from Brazil, followed by India. According to the USDA, in the Marketing Year 2024-25, Bangladesh imported 1.90 million bales of cotton from Brazil, followed by 1.40 million bales of cotton from India. Given the driven U.S. forced labor stress, Bangladesh’s clean sourcing approach expects a secure placement in the USTR submission.
The WTO Contradiction
The primary question is: Is this U.S. forced-labor tariff based on a Section 301 investigation legitimate under international trade law? As per WTO rules, imposing tariffs without first securing WTO dispute settlement authorization is a violation. Although the U.S. has proceeded with section 301 investigations, as like before it acted with China tariff round 2018-2020.
Here comes another question: the fundamental issues of proportionality. As the first Asian country, Bangladesh has ratified all 11 fundamental conventions, including 35 ILO Conventions, a formal ART with the USA, and awareness of clean cotton sourcing. Treating Bangladesh in a general manner is unjustifiable.
The European Union has also declared this proposed tariff “unjustified”. The EU listed under six economies that have failed to effectively enforce a forced labor import prohibition, whereas the EU has approved its own forced labor import ban regulation in 2024.
The main point is, the investigations conducted by the United States to impose additional tariffs on the excuse of “forced labor” is not purely for protecting human rights. Behind this, a larger political and legal strategy is working.
What should be Bangladesh’s Response?
Bangladesh’s response should be designed into three simultaneous ways: Diplomatically, Legally, and Commercially.
Diplomatically: Before July 6, 2026, deadline, the Embassy of Bangladesh in Washington must submit a written document to USTR. The documents must present Bangladesh’s existing formal instruments, such as Article 34 of the Constitution, the BLA 2006 amendments through 2026, ILO convention ratifications, the ILO country profile, and the ART commitment. This will not just be paperwork; it will play a significant role in determining the final tariff. A comprehensive consultation can take place among the same 10% tariff category economies to argue on that the ART-committed economies will be treated as functionally compliant.
Legislatively, Bangladesh may initiate the process of formulating and adopting the Forced Labor Goods Import Prohibition Act. This would strengthen Bangladesh’s commitment towards the ART and ensure a response to the gap identified by USTR.
Commercially: Trade associations like BGMEA and BKMEA could leverage their relationships with US-based retail buyers to advocate for Bangladesh’s exemplary compliance. Buyers may play an influential role in upholding Bangladesh’s interest in this process.
The Textile Mechanism- A hidden opportunity for Bangladesh RMG
The United States Trade Representative (USTR) has proposed a special mechanism under which apparel (RMG) and textile products from certain countries, which will purchase a specified amount of textile raw materials from the United State, could enter the U.S. market at a lower tariff rate than the standard Section 301 tariff.
The mechanism has two dimensions. First, the amount of the reduced duty for a trading partner would be proportional to the quantity of US cotton, man-made fiber imported from the United States, used as input for textile production. Second, a specific quantity will be linked to the volume of US cotton a partner buy in specific period of time.
Bangladesh can take this opportunity to enjoy reduced duty-free access to the U.S market. The country currently sources from Brazil, India, and Central Asia. Compared to the existing cotton sources, American cotton is premier in quality and expensive as well. The arithmetic expression is clearly defined: at 10 percent additional duty on $7.5 billion annual export to the U.S, the assumed tariff burden will be $750 million per year. A promise to buy a defined amount of US cotton could unlock a duty relief that could counterbalance the increased purchasing cost of cotton many times.
However, finalize the Rules of Origin framework for the textile mechanism is the most crucial technical discussion throughout the negotiation. Another consideration is, the geographical distance between two countries. It may take longer to import cotton from the United States, which may affect the product’s lead time. In this context, establishing a dedicated bonded warehouse facility could be a suitable solution to mitigate time constraints and ensure uninterrupted supply chain operations.
Bangladesh is not the prime target of this tariff action. The 10 percent tariff is challenging, but the textile mechanism, the reciprocal tariff agreement, the country’s legislative frameworks, and commitment towards clean sourcing together may open a new window not just to mitigating the tariff burden but also to strengthening the trade relationship between the two countries.
Author: Fatema Tuj Johora, Assistant Secretary (R&D), Bangladesh Knitwear Manufacturers and Exporters Association, Email: fatema@bkmea.com
