The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) announced a new strategy to counter a 20 per cent reciprocal tariff imposed by the US. According to Mahmud Hasan Khan Babu, President, BGMEA, the country plans to increase the use of US raw materials in garment production to avoid the additional tariff.

Babu explains, the US executive order on tariffs states that if at least 20 per cent of the raw materials, specifically US cotton, are used in a garment, the 20 per cent additional tariff will not be applied when it's exported to the US. This provides a crucial advantage for Bangladesh's garment industry, as about 75 per cent of its exports to the US are cotton-based.

Previously, the US had imposed a 37 per cent tariff, which was later lowered to 35 per cent, before the reciprocal tariff was set at 20 per cent. Babu highlights, this new tariff structure places Bangladesh on a more competitive footing with key rivals, as China faces a 30 per cent tariff and India a 25 per cent tariff.

Babu stressed the importance of continuous dialogue with the US administration, noting, other countries are still negotiating trade and security deals that could result in even lower tariffs for them. He urged Bangladesh leaders to stay engaged.

Following the announcement of the revised tariff, Babu noted, many buyers who had previously halted orders are now placing them again. He praised the interim government for its leadership, particularly the commerce and security advisers, for helping the country avoid a potential crisis. Babu also mentioned that the association would seek clarification on whether a 40 per cent value addition condition is still required for garments to be labeled ‘Made in Bangladesh.’