Key Points:
- Bangladesh signed a trade deal reducing U.S. tariffs to 19%.
- Garments made with U.S. cotton will face zero tariffs.
- The agreement concludes nine months of negotiations starting last April.
- The garment sector makes up 80% of the country’s exports.
Bangladesh just scored a major economic win days before a crucial national election. Interim leader Muhammad Yunus announced on Monday that the country signed a new trade agreement with the United States. Under this deal, the U.S. will lower tariffs on Bangladeshi exports to 19%. This is a significant improvement for the nation’s massive textile industry.
There is an even better perk for manufacturers who buy American. Yunus explained that the U.S. agreed to a specific mechanism for certain goods. If Bangladeshi factories make clothes using cotton or man-made fibers produced in the United States, those products will enter the U.S. market with zero tariffs. This incentivizes using American raw materials while boosting Bangladeshi exports.
These negotiations were not quick. Yunus stated that the talks lasted for nine months, starting back in April of last year. While the White House and U.S. Treasury Department have not yet issued public comments, the announcement brings relief to Dhaka.
This deal builds on progress made last August. Back then, Washington lowered tariffs to 20%, down from a scary proposal of 37%. Getting that number down to 19% now—with the possibility of 0% for specific items—is a vital safety net for the economy. The garment sector is the lifeblood of Bangladesh. It accounts for over 80% of all export earnings and employs about 4 million people.
The timing is interesting given regional politics. Earlier this month, U.S. President Donald Trump struck a similar deal with India, lowering their tariffs to 18%. However, India had to agree to stop buying Russian oil to get that rate. Bangladesh seems to have secured its deal by agreeing to use American supply chain materials instead.
This economic boost comes at a critical moment. Bangladesh heads to the polls this Thursday to elect a new government. The country has been under interim leadership since August 2024, following the sudden departure of former Prime Minister Sheikh Hasina to India.
