The recent decision by the US Supreme Court to eliminate the reciprocal tariff agreement has the potential to boost consumer demand in the American market and could lead to an increase in orders for exports from Bangladesh, as per local entrepreneurs and trade analysts. However, they emphasize that the situation remains uncertain, especially since Dhaka has already entered into a bilateral trade pact with Washington.
The uncertainty escalated quickly following the court ruling, with President Donald Trump imposing a 10 percent tariff on all countries shortly after, which was further raised to 15 percent the following day.
Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), advised Bangladesh to exercise caution and careful planning in response to the evolving US trade policies. He criticized the interim government for hastily signing the trade agreement just three days before the national election on February 12 and stressed the need for more cautious approaches in future negotiations.
Rahman highlighted that the US president has the constitutional authority to revise tariffs, as demonstrated by Trump’s actions. If the new 15 percent rate replaces the previously agreed 19 percent reciprocal tariff for Bangladesh, the effective tariff for exports to the US would stand at 31.5 percent, including the existing 16.5 percent Most Favoured Nation (MFN) duty.
Mahmud Hasan Khan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), expressed concerns about the abrupt changes in the US tariff regime, stating that such fluctuations make business planning challenging for exporters who had already adjusted their strategies based on the initial 19 percent rate.
While some view the Supreme Court’s decision as a positive development for Bangladesh due to potentially lower tariffs boosting demand and exports, economist Mohammad Abdur Razzaque cautioned that any export benefits may be short-lived. He highlighted the need for a deeper legal analysis of the implications of both the scrapped reciprocal tariff and the existing trade deal.
Commerce Secretary Mahbubur Rahman acknowledged that the trade agreement was signed under US pressure and expressed hope for its cancellation in light of the recent Supreme Court ruling. Bangladesh had agreed to import various American goods under the deal to reduce the trade gap, including aircraft, soybean, wheat, cotton, LNG, and LPG.
The US is a crucial export destination for Bangladesh, with bilateral trade currently favoring Bangladesh, with over $8 billion in exports to the US annually compared to $2 billion in imports. Garments constitute 86 percent of Bangladesh’s exports to the US.
Looking ahead, stakeholders like Mohammad Hatem and Mostafa Abid Khan have called for a strategic reassessment of the trade agreement, urging negotiations to potentially reduce the new tariff rate. They emphasized the need for a careful approach given the uncertainties surrounding the deal and potential future US trade policies.
Khadija Nazneen, additional secretary of the WTO wing at the commerce ministry, mentioned that the deal includes an exit clause specific to Bangladesh, providing flexibility in decision-making. The government will review the agreement and make decisions based on national policy.
Trump had initially imposed reciprocal tariffs under a national emergency declaration on April 2 last year, with Bangladesh initially facing a proposed 37 percent tariff, which was eventually negotiated down to 19 percent through the trade agreement.