Bangladesh’s strategic edge amid US tariff war

The US-China trade war, along with tariffs on Mexican exports, has created a unique opportunity for Bangladesh's ready-made garment (RMG) industry. There is no doubt that the USA will pull out of China and Mexico after the imposition of tariffs, redirecting its sourcing mainly to Bangladesh and Vietnam, and to some extent, to countries such as Pakistan, India, and Indonesia. The key question remains: How much will Bangladesh truly gain? The extent of Bangladesh's benefit depends on how well it prepares to seize this opportunity.

The US has imposed an additional 10% tariff on China and 25% on Mexico, prompting apparel buyers to explore alternative sourcing destinations. Instead of hastily increasing capacity, as it did in the past, Bangladesh should learn from its past to map its current production capabilities and expand in a controlled manner. A data-driven approach will ensure factories align with high-value product categories, rather than overproducing cheap garments that yield lower margins.

Expanding without a clear strategy can lead to inefficiencies. The capacity-mapping focus should be on upgrading facilities, improving worker productivity through training, and adopting new technology. Businesses must avoid increasing capacity without securing sufficient demand or diversifying their product range to meet evolving buyer preferences.

Vietnam has become a leader in synthetic fibre-based garments. Bangladesh has already proved its mettle with cotton-based products; if it wishes to maximise the benefit from the opportunity at hand, it must diversify beyond cotton apparel to capture the growing demand for high-end, man-made fibre (MMF) clothing. Investing in advanced manufacturing capabilities will reduce dependence on volatile cotton prices and ensure higher profitability.

Currently, Bangladesh imports most synthetic fibres, increasing costs. Establishing domestic MMF production will enhance competitiveness while reducing reliance on foreign raw materials. Collaborations with research institutions can help drive innovation and quality improvements in MMF textiles. Existing factories must be encouraged to change their product categories to non-cotton, high-value apparel.

Bangladesh must strengthen its supply chain by investing in ports, energy, and transport networks. Reducing bureaucratic inefficiencies and streamlining regulations will enhance efficiency. Partnerships with logistics providers will minimise lead times, making Bangladesh a viable alternative to China and Mexico.

Ensuring a stable fuel and energy supply is also essential.

A business-friendly environment is key to attracting global investment. Bangladesh should encourage Chinese manufacturers to relocate operations and form joint ventures to bring in advanced technology, in addition to placing orders with the home industry. The current dollar scarcity the country is facing may indeed prove advantageous in this instance.

Mexico benefits from proximity to the US, while other countries dominate non-cotton apparel, often capitalising on LDP (landed duty paid) and DDP (delivery duty paid) terms—the two most preferred terms for US customers—over Bangladesh. Bangladesh can, however, compete through cost-efficient, high-quality production and strong ethical sourcing.

Branding Bangladesh as a sustainable and ethical sourcing destination will be crucial. Buyers prioritise environmental and social responsibility when selecting suppliers. Investments in waste reduction, water conservation, and labour rights will enhance Bangladesh's reputation and appeal to global brands.

It is also crucial for Bangladeshi suppliers to choose their buyers prudently. Similarly, it may be advantageous to convince buyers to send high-end products to Bangladesh by demonstrating profits from saved tariffs. This would create a win-win situation, provided that Bangladeshi suppliers can pitch themselves compellingly.

The author is a former director of the Bangladesh Garment Manufacturers and Exporters Association.