What: Trump's 37% tariff on Bangladesh threatens the country's USD 50 billion garment industry, endangering 4 million jobs and shifting competitive advantage to India.

Why it is important: The tariff shift could trigger a fundamental restructuring of global garment manufacturing, as India's lower 27% rate creates a decisive competitive advantage in the world's largest retail market.

The US implementation of a 37% tariff on Bangladeshi garment exports marks a critical turning point for the world's second-largest apparel exporter. This unexpected measure has sent shockwaves through an industry already destabilised by recent political upheaval, prompting immediate concerns from major stakeholders and industry leaders. The readymade garment sector, which accounts for more than 80% of Bangladesh's exports and contributes roughly 10% to its annual GDP, now faces an existential threat to its competitive position. Industry representatives, including Shahidullah Azim, whose company employs 3,200 workers, are seeking urgent government intervention to negotiate with the US. The situation is particularly advantageous for neighbouring India, which faces a lower tariff rate of 27%. This differential is already attracting increased attention from US suppliers, as evidenced by companies like Evince Group, which counts Tommy Hilfiger and Levi Strauss among its clients. The impact extends beyond Bangladesh, affecting other South Asian nations like Sri Lanka, which now faces a 44% tariff on its exports to the US market.

IADS Notes: The new 37% tariff on Bangladesh's garment exports represents the latest blow to an industry already destabilised by significant challenges. As reported in August 2024, the sector suffered USD 150 million daily losses during political upheaval, affecting major retailers like H&M and Walmart. This instability, combined with Trump's recent tariff announcement, aligns with BCG's January 2025 projection of USD 640 billion in additional US import costs, forcing a fundamental reshaping of global supply chains. The industry's response has been swift, as evidenced in February 2025 when Shein offered 30% higher procurement prices to relocate manufacturing to Vietnam. March 2025 data revealed 62% of consumers expressing concern about rising retail prices, while the April 2025 AAFA summit highlighted the industry's struggle to balance tariff pressures with sustainability commitments. This complex situation threatens Bangladesh's competitive advantage, potentially accelerating the ongoing shift in global manufacturing dynamics.

Tariffs shock Bangladesh garment giants: ‘This is terrible for our business’