US–Bangladesh Trade Deal: Narrow Edge For Dhaka, Upper Hand For Washington

It is neither.

The narrative is analogous to the recent US trade policy pattern: a narrow opening tightly wrapped in conditions, designed to discipline supply chains rather than reward efficiency.

The headline tariff cut (from 37% to 19% on Bangladeshi goods) looks generous if you stop reading there. But the agreement starts making sense only once you get past the headline. What stands out is a zero reciprocal tariff option for garments made with US-origin cotton or man-made fibres. Volumes are capped. Eligibility is tied directly to Bangladesh's increased purchases of American textile inputs.

This is not free trade. It is managed access, with sourcing rules doing the heavy lifting.

Apparel Exports

For Bangladesh, the attraction is obvious. Apparel accounts for nearly four-fifths of exports, employing more than four million people. The US market is big, fickle, and price-sensitive. In 2024, it absorbed about $7.4 billion of Bangladeshi garments — only 6% of Bangladesh’s total exports, but enough to matter at the margins.

After all, margins are where this deal operates.

The comparison with India has become unavoidable. India’s own understanding with the US leaves its textiles and apparel exports facing a flat 18% reciprocal tariff: no sourcing exemptions, no zero-duty lane.

Tariff Arithmetic

On paper, India looks slightly better off: 18% beats 19%.

In reality, that arithmetic collapses as soon as buyers start running numbers. A Bangladeshi garment that qualifies for the zero-tariff option pays only the standard US MFN (most-favoured nation) duty — around 12% for most apparel, while an Indian garment continues to face close to 30% in combined duties. In low-end knitwear, this gap is not subtle. It is the difference between keeping an order and losing it.

Some economists put a figure on it. Zahid Hussain, a former World Bank economist, reckons Bangladesh could pull in as much as $2 billion in diverted orders from India and China. That may be optimistic, but it could still make Indian exporters nervous.

You can hear it already in Tiruppur and Surat. Exporters talk about “temporary trade disruption” in public. In private, they worry about a slow plunge in the most price-sensitive categories. Upstream suppliers are blunter: if Bangladeshi factories start chasing US cotton to qualify for tariff relief, Indian yarn exporters will feel the pinch.

How Bangladesh’s Industry Works

Still, this is where the enthusiasm needs to be checked. Most Bangladeshi garments will not qualify for zero tariffs. According to the Global Trade Research Initiative, a typical Bangladeshi export still attracts a total duty of around 31% (12% MFN and 19% reciprocal), unless it meets the sourcing conditions.

And those conditions cut straight across how Bangladesh’s industry actually works.

Bangladesh does not control its inputs. In 2024, it imported $16.1 billion worth of textile inputs. China supplied the bulk. India supplied much of the rest. The US supplied just $274 million, almost entirely raw cotton.

This matters because Bangladesh is not a fibre-to-fabric powerhouse. Most of its factories assemble garments using imported yarn and fabric. Fewer than one-third of its exports start at the fibre stage.

What Bangladesh really needs is yarn and fabric. To scale up production that qualifies for zero tariffs, it would have to invest heavily in spinning and fabric capacity — quickly, and at scale.

That is not a seasonal adjustment. It is an industrial shift.

US Dynamics 

The more likely outcome is less dramatic. US cotton exports rise. A handful of large Bangladeshi factories experiment with the zero-duty lane. Most of the industry carries on exporting to Europe, where more than 60% of Bangladesh’s garments already go, duty-free, and without sourcing strings.

Regionally, the deal still reshuffles the order slightly. China remains stuck with tariffs north of 30%. Vietnam faces a 20% reciprocal tariff with no carve-outs. Pakistan and Indonesia sit around Bangladesh’s base rate, but without any zero-duty escape hatch. Cambodia and Sri Lanka remain disadvantaged despite strengths in compliance and ethical sourcing.

What Washington gets out of all this is clearer than what Dhaka gets. The US tightens its grip on supply chains at a moment when trade policy is increasingly about control rather than openness. Cotton farmers gain a reliable new outlet. US negotiators get a template they can reuse elsewhere.

Bangladesh, meanwhile, is playing a longer game. With graduation from Least Developed Country (LDC) status coming in 2026 and European preferences set to erode, even a narrow and conditional foothold in the U.S. market has strategic value.

Agricultural Sector  

The price is not trivial. Bangladesh has agreed to lower tariffs on US industrial and agricultural goods, lock in purchases of American farm and energy products, and accept a set of compliance commitments — labour standards, forced labour, data flows, and intellectual property — which will test its institutions as much as its factories.

This is not a story of winners and losers. It is a narrative of leverage. Bangladesh gets a small, carefully rationed edge. India loses some room at the bottom end. China stays boxed in. Washington writes the rules.

Whether Bangladesh can turn this into something durable will depend on how fast it can rewire an industry that has spent years optimising for Europe. Trade theory will matter less than balance sheets, power supply, port congestion, and the willingness of buyers to tolerate experimentation.

For now, Dhaka has edged closer to the front of the queue for US apparel orders. Staying there will be harder than getting there. And the deal, for all its talk of reciprocity, makes that very clear.

(The writer is an economics analyst and journalist. Views are personal.)