Will Bangladesh benefit from higher US tariffs on China, India?

The Trump administration's imposition of higher reciprocal tariffs on India and China, two of Bangladesh's main competitors in the global readymade garments sector, is definitely a boon for Bangladesh, according to local exporters.

They, however, caution that it is not yet time to celebrate as there are many factors that can take away the advantage.

The United States has imposed 50 percent and 30 percent reciprocal tariffs on Indian and Chinese shipments, respectively. In comparison, the rate is 20 percent for Bangladeshi goods, which gives Bangladesh an edge in positioning itself as an alternative sourcing hub for international retailers and brands.

Speaking at an event on Saturday, Zahid Hussain, a former lead economist at the World Bank's Dhaka office, estimated that local exporters, particularly in the readymade garment sector, could secure up to $2 billion in additional orders, largely redirected from India and China, due to the tariff boon.

Exporters, however, say it is too soon to make any specific estimate, and that Bangladesh is not ready to handle such a big shift.

"It is too early to celebrate because there are many ifs and buts. Moreover, Trump is unpredictable. Negotiations could lower tariffs for India and China at any time," said Fazlul Hoque, managing director of Plummy Fashions.

"Besides, Bangladesh's market is yet to mature to the level where it can attract $2 billion worth of new orders, particularly shifting orders," he added.

He, however, said that there is a good possibility for Bangladesh to benefit. "The amount of shifting orders can be even more than the estimated $2 billion if the situation goes in our favour."

Shovon Islam, managing director of Sparrow Group, which supplies a large share of its output to the US, said orders have already begun to shift. "It is true that American retailers and brands are coming with work orders since the tariffs were finalised."

"But it is unrealistic to assume Bangladesh will bag all the work overnight," he opined.

Pointing to constraints at home, he said, "Currently, Bangladesh's capacity to produce in large volumes remains limited. Many factories still lack the technical sophistication to cater for higher-value orders."

Besides, he noted that India's ability to produce value-added garments may shield it from losing business in that segment, which means only basic apparel orders are likely to shift from the country.

Industry leaders also point out that some Indian exporters are sharing the tariff burden with their US buyers to maintain competitiveness. In some cases, Indian exporters are absorbing around 20 percent of the tariff while US importers cover 30 percent, reducing the overall impact.

Furthermore, there is a possibility that India and the US might relaunch negotiations over the tariff issue soon, which could result in a lower rate for India. In that case, it is unlikely that work orders will shift from India in bulk.

Mahmud Hasan Khan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said it was too early to quantify the potential windfall.

"There is no authentic data on how much business may be diverted. The amount could be less than $2 billion, or could be more, depending on how competing countries and markets behave," he said.

"The opportunity is there, but it is still at a primary stage," he said, adding, "Only after a few months will we see how the new tariff regime with the US plays out."