Bangladesh's apparel industry in shifting global trade landscape
US President Donald Trump announced a flat 10 per cent tariff on all countries for 150 days effective from 24 February 2026, following the country's Supreme Court verdict that scrapped reciprocal tariffs for different countries, including Bangladesh. Bangladesh's last negotiated reciprocal tariff with the US was 19 per cent.
This reduced levy might give temporary relief to Bangladesh but may dampen its longer-term gains. The reciprocal tariffs actually allowed Bangladesh favourable conditions for exporting to the US since the same tariffs imposed on other major apparel producing countries were higher than ours. For instance, the US reciprocal tariff for China, the world's largest apparel exporter with about a 31 per cent global share, was 34 per cent. It was 20 per cent for Vietnam, the world's third largest apparel exporter having about 6 per cent global share. So, it was an opportunity in disguise for Bangladesh, the world's 2nd largest apparel exporter having about 7 per cent global share.
Bangladesh's apparel export also witnessed steady growth in the US market after the reciprocal tariffs were announced. According to the Office of Textiles and Apparel (OTEXA) of the USA, Bangladesh's share in the US apparel market increased to 10.53 per cent in 2025 from 9.26 per cent in 2024, as China lost market share due to the burden of the reciprocal tariffs it faced last year.
Now the reduction in the tariffs may lower commodity prices in the US market, encouraging buyers to put more orders to manufacturing countries. But at present as the US tariffs are equal for all, Bangladesh has lost the competitive edge over China and Vietnam which the country enjoyed under the reciprocal tariff regime. However, Bangladesh should continue its dialogue with its US counterparts to ensure that the duty-free export opportunity for Bangladeshi apparel to USA using US cotton, which it secured during the reciprocal tariff trade negotiations, remain unchanged.
The USA is the largest single market for Bangladesh's apparel export. About 18 per cent of our total apparel export is concentrated in the US market. But as a region, the European Union is our largest apparel export destination. More than 50 per cent of Bangladesh's apparel export is destined to the EU.
India and the European Union (EU) recently announced conclusion of a Free Trade Agreement (FTA). Through this FTA, India gained zero-duty access to the EU for sectors which include its apparel and textiles. The agreement, announced on 27th January, is expected to come into force in 2027, meaning apparel exports from India to the EU will enjoy duty-free access, overcoming previous tariff barriers that ranged from 0-12 per cent.
Trade agreements of other countries are beyond our control. However, this EU-India FTA will have implications for Bangladesh's apparel exports to Europe.
India, the world's 6th largest apparel exporter, counts the EU as its second-largest export destination for textiles and apparel, after the USA. With the FTA between India and the EU, India has now gained a 12 per cent competitive advantage over Bangladesh. This 12 per cent competitive advantage of India may increase to 24 per cent under the combined effect of Bangladesh's LDC graduation and the India-EU FTA after 2029 when our export will be subject to 12 per cent duty.
Though Bangladesh may continue to enjoy duty-free access even after the graduation if the country attains GSP Plus, its apparel export would still face full MFN tariffs under current EU GSP Plus provisions. Under the current GSP Plus provisions, Bangladesh would have to comply with two-stage rules of origin. Moreover, Article 29 of the GSP Plus scheme outlines safeguard measures for textile, agriculture, and fisheries industries. The safeguard measure states that if any of these three individual sectors exceeds the product graduation threshold -- which is 37 per cent for textiles -- that sector will fall outside the purview of GSP Plus duty-free access. Bangladesh has already crossed the threshold in textile.
It is also relevant to mention that Vietnam, the world's third-largest apparel exporting country after China and Bangladesh, signed an FTA with the EU in 2020. Vietnam's apparel export is currently subject to average 9.6 per cent duty on the EU market that will fall to zero duty by 2027 by virtue of the FTA.
Therefore, making all-out efforts to maintain zero-duty access through a similar FTA with the EU or pursue GSP Plus with relaxed rules of origin and safeguard provisions to retain apparel-sector preferences should be now the topmost priority in Bangladesh's diplomatic agenda.
The new government in Bangladesh just took charge after a free and fair election widely praised by the international community. It has given a positive signal to countries across the world. The government just after taking the oath applied for deferred LDC graduation which is a prudent decision. It is high time during this shifting global trade scenario, the government also started fresh economic diplomacy with our export partners. This underscores the need for seriousness, proper collaboration between government, industry associations, and major brands and retailers who source from Bangladesh, as well as immediate policy-level dialogues between the government of Bangladesh and the governments of the developed countries. We believe that our new charismatic Prime Minister and his deserving cabinet through smart diplomacy could secure an enabling international trade landscape that will take the country's apparel industry to a new height and flourish our economy.
Ashikur Rahman Tuhin is the Managing Director of TAD Group. He is a Director of Exporters Association of Bangladesh (EAB) and a former Director of Bangladesh Garment Manufacturers and Exporters Association (BGMEA). Garment Manufacturers and Exporters Association (BGMEA).
