🇧🇩📉 Bangladesh's Textile Sector After U.S. Tariff Reforms: Challenges, Crisis & the Call for Transformation

In 2025, the textile industry in Bangladesh—a powerhouse that has long stood as the second-largest apparel exporter in the world—faced one of its greatest threats in recent memory: a sharp shift in U.S. trade policy.

With the United States slapping new high tariffs (35%–37%) on a broad range of textile imports from countries including Bangladesh, the very foundation of Bangladesh’s export engine has been shaken. The U.S. is not just any trading partner—it is one of the largest and most profitable markets for Bangladeshi garments.

As a country whose economic health is closely tied to its ready-made garments (RMG) sector, these tariff reforms do not represent just a trade challenge—they pose a national economic risk. The path forward is filled with both peril and potential.

Let’s explore this pivotal moment in Bangladesh’s economic journey and the profound implications it carries for its textile and apparel industry.

 

📦 Why the U.S. Market Matters So Much

For the past two decades, Bangladesh’s RMG industry has powered the nation's GDP growth, accounting for:

• Over 80% of total exports
• Around $47–50 billion USD annually in garment exports
• 4+ million direct jobs, mostly for women
• Thousands of SME suppliers, subcontractors, and logistic chains

The U.S. accounts for roughly 20–25% of those exports, including:

• Knitwear (t-shirts, polo shirts, hoodies)
• Woven items (shirts, pants, jackets)
• Denim
• Sweaters
• Undergarments and loungewear

This reliance is no accident. U.S. retailers—like Walmart, Target, Costco, H&M, GAP, and many more—found in Bangladesh a low-cost, high-volume, dependable partner with decent compliance and improving sustainability standards.

But with the new tariffs in effect, this advantage is vanishing.

 

🧾 Understanding the New Tariff Reforms

Starting mid-2025, the United States, citing economic nationalism and trade rebalancing policies, implemented reciprocal tariffs of 35%–37% on key textile products from Bangladesh and several other countries that don’t share a free trade agreement (FTA) with the U.S.

For Bangladesh, this move is unprecedented.

To put things in perspective:

• A $10 t-shirt from Bangladesh that previously entered the U.S. with 16% duty (total cost: $11.60) will now face over 35% duty, making its landed cost rise to $13.50+
• For U.S. buyers with slim retail margins, this is unacceptable

This creates an automatic incentive for them to shift orders to Vietnam, India, Mexico, or Jordan, where FTAs or lower duties remain in place.

 

⚠️ Major Challenges Unleashed by the Tariffs

1. ❌ Erosion of Price Competitiveness

Bangladesh’s global advantage has always been “value for money.” Its ability to offer quality apparel at highly competitive prices made it a favorite among cost-conscious buyers.

But now, higher U.S. import duties negate this price advantage entirely. Buyers are comparing costs post-tariff and finding better deals elsewhere.

Countries with FTAs like:

• Vietnam (under CPTPP)
• Mexico (under USMCA)
• Jordan (under FTA with U.S.)

…are now offering the same garments at lower post-tariff costs, even if their base prices are slightly higher.

2. 📉 Potential Decline in Orders & Revenue

Even a 10–15% drop in orders from the U.S. could translate into $4–6 billion USD in lost exports annually.

For a country where garment factories run on tight margins, this could lead to:

• Factory closures
• Loan defaults
• Delayed payments to suppliers
• A chain reaction across banking and manufacturing ecosystems

3. 👩‍🏭 Threat to Workers & Social Stability

The human cost may be even higher. The RMG sector employs over 4 million workers, 70% of whom are women. It has been the single largest driver of women’s empowerment and rural income growth in Bangladesh.

A fall in exports will force:

• Layoffs of thousands of workers
• Delays or non-payment of wages
• Shutdowns of production units

This could lead to social unrest, reverse progress on gender equality, and weaken rural economies dependent on RMG remittances.

4. ⚙️ Raw Material Dependency & Weak Rules of Origin

Another silent challenge is Bangladesh’s reliance on imported inputs. Most cotton, yarn, dyes, trims, and accessories come from China, India, or Korea.

The U.S. imposes "Rules of Origin" under many of its trade arrangements. Bangladesh struggles to meet these requirements due to:

• Lack of integrated backward linkage
• Imported fabric base
• Few vertically integrated mills

This disqualifies many products from lower tariffs, making them vulnerable to the full brunt of the reform.

5. 🚢 Infrastructure & Logistic Weaknesses

Bangladesh has made progress, but still lags in key areas:

• Congested ports (e.g., Chattogram)
• Delayed customs clearance
• Poor transport infrastructure
• High shipping lead times

In a global race to serve fashion brands with speed, these inefficiencies reduce Bangladesh’s competitiveness when combined with the new tariff burden.

 

🌍 The Bigger Picture: Global Trade Realignment

This is not just about tariffs. It’s part of a global pattern:

• Rising protectionism
• Geopolitical trade tensions
• Trade wars shifting buyer behavior
• Increased focus on nearshoring and reshoring
• A global move toward regional trade alliances

Buyers want faster, cheaper, and more politically stable sourcing. Bangladesh must understand this shift and adapt.

 

🔄 How Bangladesh Can Respond: Strategies for Survival & Success

1. 📈 Diversify Export Markets Immediately

Relying on the U.S. is risky. Bangladesh must boost exports to:

• EU (under GSP+ post-2029)
• UK (under DCTS scheme)
• Japan, South Korea
• Middle East (UAE, KSA)
• Latin America and Africa

These markets may be smaller, but collectively they can offset the U.S. losses.

2. 🏭 Strengthen Backward Linkage

To meet future trade rules and reduce input costs, Bangladesh must:

• Invest in local spinning, knitting, dyeing, and finishing plants
• Build clusters with integrated production
• Encourage technology transfer from global partners

This will improve both lead time and origin compliance, reducing tariff exposure.

3. 🔝 Shift to High-Value Products

Bangladesh still heavily exports basic apparel. To survive, the country must focus on:

• Activewear
• Sportswear
• Performance textiles
• Eco-friendly fashion
• Premium denim and outerwear

These products can command better prices and are less sensitive to tariff-induced cost increases.

4. 🤝 Push for Trade Diplomacy

Government-to-government engagement is crucial. Bangladesh should:

• Negotiate for a bilateral trade agreement or limited trade relief
• Expand diplomatic ties in Washington
• Offer reciprocal benefits (e.g., U.S. cotton or wheat purchases)

The aim should be to create room for negotiation without waiting for long-term FTA discussions.

5. 🌿 Green & Ethical Production Focus

Sustainability can be a new weapon. Buyers are prioritizing:

• Green factories
• Reduced water usage
• Solar-powered manufacturing
• Fair labor compliance

Bangladesh already has the highest number of LEED-certified green factories globally. That strength must be marketed and scaled.

6. 📊 Invest in Digital Transformation

Digitizing:

• Supply chains
• Factory operations
• Order tracking
• HR management

…can improve both productivity and transparency—core values that international buyers respect and reward.

 

🔮 The Road Ahead: Will Bangladesh Rise or Retreat?

The U.S. tariff hike is undoubtedly a major blow. But it also serves as a wake-up call. For too long, Bangladesh’s apparel sector has relied on cost advantage alone. The time has come to pivot to a smarter, more strategic future.

This means:

• Making tough decisions
• Investing in transformation
• Building new markets
• Reimagining the country’s role in global supply chains

If Bangladesh can adapt quickly, it can still lead the global apparel industry in quality, ethics, and sustainability—not just cost.

 

✨ Final Thoughts: Crisis Creates Champions

History shows that challenges create champions. The U.S. tariffs are tough, but not insurmountable.

Bangladesh has the manpower, the experience, and the willpower. What it needs now is decisive leadership, industry collaboration, policy innovation, and international support.

Let this be not just a challenge—but a defining moment for Bangladesh to reinvent its textile future.