Exporters not sweating over US-Bangladesh trade deal

NEW DELHI: Bangladesh on Monday secured 19% reciprocal tariff from the US under a trade agreement, while managing some exemptions from reciprocal tariffs for textiles and garments manufactured using American material. While Indian exporters are keeping a close watch on the details - especially after some of the stocks took a beating - they are not unduly worried.

The reduction in the reciprocal tariff from 20% to 19%, compared with 18% for India, widens the price gap between garments made in Bangladesh and those produced here due to lower wage cost across the border.




But the exemption from reciprocal tariffs for Bangladesh-made garments using US cotton and man-made fibre, is unlikely to provide a major edge as it will involve transportation cost and the spinning industry in and around Dhaka is not very competitive.

"It was struggling until a few months ago. A large part of the global trade uses man-made fibre. So, we do not have much reason to worry," said Premal H Udani, CMD of Kaytee Corporation.

Industry estimates suggest that cotton accounts for around 20% of the overall cost and the duty benefit will only be on that component.

"Let's wait for the fine print. It doesn't look alarming," said Pearl Global Industries MD and group president Pallab Banerjee.

Udani said that many international buyers are looking to diversify their sourcing, given the political uncertainty in Bangladesh and India can take advantage of that.

"There is nothing to worry, we have got a good deal from the US. In fact, even for India cotton for re-export can be considered for concessions, if there is a 20% value addition," said A Sakthivel, chairman of the Apparel Export Promotion Council.

Trade research body GTRI said in 2024, Bangladesh exported 63% of its over $50 billion garments to Europe and around 15% went to the US.

"In practical terms, a Bangladeshi garment that normally faces a 12% US MFN tariff would attract a total duty of 31% (12% MFN + 19%. For India, the comparable total would be about 30% (12% MFN + 18% reciprocal). But, Bangladeshi garments made with US fibres would avoid the reciprocal duty, paying just the 12% MFN tariff. While this appears to be a significant concession, Bangladesh's export structure and its heavy dependence on non-US textile inputs mean the arrangement is likely to result in only a limited increase in garment exports to the US," it said.

Besides, it said Bangladesh agreed to offer too many concessions to bag this deal from the US, opening up its market US machinery, chemicals, energy goods, soy, dairy, beef and cotton and has also committed to buy about $3.5 billion of US farm products, energy and aircraft.