US reciprocal tariff taking effect tonight

The new 20 percent reciprocal tariff by the United States on Bangladeshi exports to the American market will come into effect tonight, which may open up opportunities for the country's apparel sector as it adapts to evolving global trade dynamics.

This duty will raise the total tariff on Bangladeshi garments, the main item in the country's export basket, to 35.5 percent.

While it may affect competitiveness, industry leaders see it as a chance to reaffirm their manufacturing might amid higher rates imposed on market peers.

In the fiscal year (FY) 2024-25, Bangladesh's garment exports to the US rose to $7.54 billion, marking 14 percent year-on-year growth. The US remains the country's largest single-nation export destination for ready-made garments (RMG).

The new tariff will apply to all consignments shipped from Chattogram port after August 7, starting at 12:01 am tonight, according to the White House executive order issued on July 31.

Shipments dispatched earlier will remain exempt.

"When the Trump administration imposed a 35 percent tariff in April, Western buyers tried to reduce prices by 5 to 10 percent. But after the US president revised it down to 20 percent, no serious bargaining has taken place yet," said Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

He said that it usually takes 28 to 35 days for shipments to reach US ports, meaning consignments leaving Chattogram port after midnight tonight will fall under the new duty structure.

Meanwhile, Finance Adviser Salehuddin Ahmed told journalists yesterday that while the 20 percent tariff is not ideal, it is still better than the initial 35 percent.

He added that Bangladesh remains competitive, especially in knitwear, where over 80 percent of backward linkage offers a strong advantage. "Our reputation with timely payments and ethical business has built goodwill abroad," said the adviser.

However, he pointed out that no formal agreement has yet been signed regarding reciprocal tariff adjustments.

AK Azad, chairman and managing director of Ha-Meem Group, one of the largest apparel exporters to the US, said some last-minute negotiations have taken place with buyers, who are now trying to reduce their offers in response to the new tariff.

"Everyone is under pressure. As the tariff has gone up by 20 percent, buyers are asking us to share it," Azad told The Daily Star.

"They are suggesting that the burden should be shared, partly by us and partly by them. But we simply cannot."

The exporter said they don't have that room. "Our margins are already razor-thin, and absorbing further cost increases is not feasible."

"With mounting cost pressures and extremely tight profit margins, the scope to absorb any new tariff burden is very limited," he said. "In such a scenario, asking suppliers to adjust prices downward is neither sustainable nor fair."

Although the new duty takes effect from tomorrow and goods shipped before then will face lower rates, exporters said there had been no last-minute rush at Chattogram port.

Syed Tanvir, managing director of Pacific Jeans, said there was no visible scramble to meet the tariff deadline.

"Port congestion remains normal. Exporters are not scrambling to push shipments ahead of the cut-off," he said.

Tanvir said that most exporters are taking a measured approach this time, opting to absorb the change rather than react in haste. "Given the long shipping cycle and buyers' negotiation patterns, many have already adjusted their planning to factor in the tariff."

Rakibul Alam Chowdhury, director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said many US buyers rushed shipments before July 31 to avoid the new duty, which caused a surge in exports through Chattogram port.

Now, some buyers are proposing to share the additional cost for new orders, he added.