Too Reliant, Too Late? The 37% Tariff and Bangladesh’s Economic Crossroads
Design: Team Nebula
One of the most discussed issues in present-day Bangladesh is the 37% tariff—a predicament that has caused a stir throughout our economy. You might be lounging comfortably at home, scrolling through the headlines, wondering: Why is everyone talking about this? Why does it carry an air of tension, even anticipation? And most importantly—why should you care?
So What Exactly is This "37% Tariff"
Tariffs are extra costs added when a country buys things from another country. Suppose you want to buy a car from abroad. The car costs $10, but your country has a tariff on toy cars - $2. So now, you have to pay $12 for that car. This extra $2 is the tariff.
Currently, brand-new tariffs that have been imposed as part of Trump's "Liberation Day" initiative, which aim to counter what his administration describes as unfair trade practices by countries that maintain high barriers against US exports. The policy introduces a baseline 10 percent tariff on all imports, with significantly higher rates applied to nations the administration says engage in currency manipulation, protectionism, or impose other non-tariff barriers. According to a chart published by the White House on 3rd April, the US government claims Bangladesh effectively imposes a 74 percent tariff on American goods. In response, a staggering 37 percent "discounted reciprocal tariff" will now be levied on Bangladeshi products entering the US market.
Why Are We Reading This Article?
Have you ever wondered how our economy has flourished so much in the past few decades? What’s fueling the steady rise of our foreign reserve? The answer is the contribution of our very own Garment Industry. The export earnings from our garments industry played a huge role in these cases. And when it comes to exports, our biggest export hub is none other than the United States of America itself.
Due to having a cheap labor market and minimal profits, our garment industry has gained popularity so quickly. If we look at the stats, we will find out that the readymade garments industry is of existential importance to Bangladesh's economy, accounting for
- More than 80% of total export earnings
- Employing 4 million people and
- Contributing roughly 10% to annual GDP.
Now, pause for a moment and process this. 80% of total export earnings—does this, by any chance, mean a small amount? No, right?
So, tell me, can we really afford to stay in the darkness by remaining uninformed about the policies and challenges shaping this industry?
The Tariff Crisis—Can it Shatter Our Economic Stability?
Now let’s get to the important part: What is this “37% tariff”?
In simpler terms, for every 100 taka goods sent, an additional 37 taka has to be paid. You might think that, oh, they are the importers, so they have to pay this extra amount. But trade doesn’t work like that.
If sourcing garments from Bangladesh becomes too expensive, buyers will eventually explore alternative locations, decide to cancel orders, and shift these orders to countries with fewer restrictions. In that case, the situation will worsen significantly; billions of dollars worth of garments, ready to be shipped to the United States, will get stuck at the port. Factories operating on low profit margins will struggle to survive. If Bangladesh's industrialists wish to alleviate this burden, they will need to invest heavily since the profit margin is very low.
The only silver lining in this storm is that the Trump administration has given Bangladesh a 90-day interval before the tariff takes effect.
This means we have a brief moment to strategize, negotiate, and find a way out before the full weight of this decision crashes down on our economy. With billions of dollars on the line, our biggest export market in danger, it cannot be denied that we are backed into a corner where our chances of overcoming this difficulty are slim.
Tariff Legitimacy Debate:
There has been an ongoing debate surrounding the imposition of the tariff. Although the Trump administration has cited the trade deficit as the reason behind this tariff, many economists argue that trade deficits are not always detrimental to a country.
A trade deficit is like buying things with a credit card. Suppose you're buying something on credit—it may seem like a liability, but if used wisely, it can lead to long-term benefits.
One notable example of a trade deficit benefiting an economy is South Korea. Back in the 1980s and early 1990s, South Korea ran a trade deficit, and investing a huge amount in industrial development proved to be beneficial for the country at that time.
Besides, the global share market is crashing due to the imposition of this tariff--
- London’s FTSE 100 nosedived 4.4%, crashing to 7,702—its lowest point in over a year.
- Paris and Berlin followed suit, with their markets tumbling into the red.
- Asia wasn’t spared either—leading indexes suffered a devastating plunge, with analysts describing the selloff as nothing short of a "bloodbath."
So What’s Next?
By following conventional solutions, Bangladesh might manage to bypass this tariff through negotiations or by applying zero duties, similar to Sri Lanka. It is a matter of time to see what steps our government takes and what the future holds for us.
However, adversity gives rise to tenacity and innovativeness. Right now, as we are scrambling to find quick solutions to this problem, the need to rebuild our policies and ensure their proper implementation to strengthen our economy is being felt more than ever before.
Tell me, how much longer can we ignore the need to modernize our economy while the world advances?
While our experts have been searching for long-term solutions, the lack of timely action remains glaringly absent.
Talking to New Age, Professor Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue, said that they have been urging the government for the past few years to consider market diversification.
‘Our export heavily relies on a single destination. If our destinations were diversified, the hurt of the fresh US tariff were comparatively lower,’ he added.
He also said that they always urge the government to diversify the market, primarily to focus on regional markets, which may protect Bangladesh from the trade wars of big economies.
Amidst all the negativity, experts have opined that tackling this challenge with proper measures could create a new set of opportunities in the trade sector for Bangladesh. Diversification of export destinations, along with lowering excessive reliance on a single sector like the garment industry, might aid us in making our economy strong.
Before Concluding
As Bangladesh tries to figure out how to handle this tariff problem, it really makes you sit back and think. All these ideas about selling different things to different countries – which experts like Professor Rahman talked about for a long time – are suddenly super urgent. It's kind of amazing how fast we can react when there's a fire, even if maybe checking the smoke detectors earlier might have been easier!
References:
- Sarwar. (2025, April 6). Diversified destinations would protect Bangladesh – Mustafizur Rahman. Centre for Policy Dialogue (CPD). https://cpd.org.bd/diversified-destinations-would-protect-bangladesh/?fbclid=IwY2xjawJgrlVleHRuA2FlbQIxMQABHsf6-etNM8_oo1K4pkhb4K6DEI8eBGClmj8RJTYWGNmSFELUkblBePSOr6VU_aem_d0zs4TdFvLQWNB8hEh0qxw&sfnsn=wa
- Uddin, J. (2025, April 3). RMG leaders say Trump’s tariff devastating blow for Bangladesh’s $10b US market, competitors to gain. The Business Standard. https://www.tbsnews.net/economy/rmg/rmg-makers-say-industry-will-be-seriously-impacted-bolt-blue-us-tariffs-1107191
- Smith, N. (2025, April 4). Trade deficits do not make a country poorer. Noahpinion. https://www.noahpinion.blog/p/trade-deficits-do-not-make-a-country
- Trump tariff shock stings Bangladesh, Sri Lanka garment giants, may help India. (2025, April 3). Reuters. https://www.reuters.com/markets/asia/trump-tariff-shock-stings-bangladesh-sri-lanka-garment-giants-may-help-india-2025-04-03/?utm_source=chatgpt.com
- Sherman, E. H. &. N. (2025, April 7). Wild market swings as tariffs rattle US economy. https://www.bbc.com/news/articles/czrvngj03jlo