The decision by the US Supreme Court to eliminate the reciprocal tariff agreement is anticipated to stimulate consumer demand in the American market and potentially boost orders for goods from Bangladesh, as local entrepreneurs and trade analysts suggest. However, they emphasize the uncertainty ahead, especially after Dhaka’s recent bilateral trade pact with Washington.
The situation became more complex almost immediately. Following the court ruling on Friday, President Donald Trump imposed a 10 percent tariff on all countries, which was further escalated to 15 percent the next day.
Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), shared insights with The Daily Star, highlighting the need for Bangladesh to exercise caution and careful planning in response to the evolving US trade policies.
Rahman criticized the hurried nature of signing the trade agreement by the interim government just three days before the national election on February 12, emphasizing the importance of approaching future negotiations with greater deliberation.
He pointed out that President Trump holds the constitutional authority to revise tariffs, as demonstrated by the recent changes. If the 15 percent tariff supersedes the previously agreed 19 percent reciprocal tariff for Bangladesh, the effective tariff for Bangladeshi exports to the US would reach 31.5 percent, including the existing 16.5 percent Most Favoured Nation (MFN) duty.
According to Mahmud Hasan Khan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the abrupt shift in the US tariff policy could disrupt exporters’ strategies, as they had adjusted plans based on the previously agreed 19 percent rate.
While Khan sees the Supreme Court ruling as potentially beneficial for Bangladesh due to lower tariffs leading to increased demand and exports, economist Mohammad Abdur Razzaque, chairman of Research and Policy Integration for Development (RAPID), cautioned that any export boost might be short-lived.
Razzaque emphasized the need for a thorough legal analysis of the implications of both the scrapped reciprocal tariff and the existing trade deal between Bangladesh and the US. He raised concerns about whether Bangladesh is still obligated under the deal to import certain goods from the US and whether it can resist pressure to purchase these committed commodities.
Commerce Secretary Mahbubur Rahman admitted that the interim government had signed the agreement under US pressure, expressing hope that the deal would be reconsidered in light of the Supreme Court’s decision.
The bilateral trade agreement requires Bangladesh to import various American goods, including aircraft, soybean, wheat, cotton, LNG, and LPG, aiming to reduce the trade deficit between the two countries.
As the largest export destination for Bangladesh, the US currently receives over $8 billion in exports annually, with garments accounting for 86 percent of these exports.
Moving forward, stakeholders like Mohammad Hatem and Mostafa Abid Khan urge the government to reassess the terms of the trade deal and explore options for minimizing the impact of the new tariffs.
Khadija Nazneen, additional secretary of the WTO wing at the commerce ministry, mentioned that the deal includes an exit clause unique to Bangladesh, allowing for flexibility in decision-making based on government policy.
The journey of tariff negotiations between Bangladesh and the US, starting from the proposed 37 percent tariff to the recent adjustment to 19 percent after the deal, reflects the ongoing challenges and uncertainties in the trade relationship.
