Some US RMG buyers want price cuts

Some of the US clothing and footwear retailers and brands are demanding a big discount from Bangladeshi suppliers, and are putting the work orders on hold to adjust the new reciprocal tariff measures, exporters said.

In some cases, the buyers are demanding a 10 percent discount from local suppliers on the ready-to-ship goods and are asking the local manufacturers to delay the process of making garments.

The local suppliers are now trying to negotiate prices of garments under the new tariff regime. However, not all the US buyers are demanding the price cuts as many are trying to wait and see.

The suppliers and the brands are doing their homework.

For instance, a US buyer in Bangladesh has sought a 10 percent discount on the ready-to-ship goods and suggested bearing 3.3 percent discounts by suppliers, 3.3 percent by fabric suppliers, and 3.3 percent by retailers, said an exporter, wishing not to be named.

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It is true that some of the US buyers are demanding discounts from the local suppliers, said Rubana Huq, former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA). She, however, declined to mention the names of retailers and brands.

Faruque Hassan, managing director of Giant Group, said his US buyers have not yet demanded discounts, and the work orders his company got will continue, but new work orders may slow down.

He added that nearly 30 percent work orders from the US retailers and brands may drop as the buyers will prefer shifting work orders to Egypt, Jordan, and India as those countries are levied lower tariffs than that of Bangladesh.

Syed M Tanvir, managing director of Pacific Jeans, said his business is continuing as usual.

He is optimistic that Bangladesh will perform better in exporting cotton fabric made garments as Bangladesh is very strong in this area.

China and Vietnam are facing more duty than Bangladesh in the US markets.

Moreover, Bangladesh has improved the quality, compliance and the capacity a lot over the years.

"I really hope Bangladesh can convince the US to drop the tariffs to 10 percent. If your tariff stays at 37 percent and other countries stay as now, Bangladesh will lose considerable knit and shirt business to India, and some denim / bottoms will be lost to Pakistan, Egypt and Kenya," a US buyer sent the message to a local supplier asking not to be named. The local supplier shared this message with The Daily Star in WhatsApp.

"A lot will change over the next few weeks, for sure. But we are heading towards a tough period for sure," the US buyer also said in the message.

Mohiuddin Rubel, former director of the BGMEA and managing director of Bangladesh Apparel Exchange, told this newspaper that some buyers have already requested that shipments be put on hold until further notice.

"In particular, smaller buyers are pressuring suppliers to either absorb the full tariff or share the cost, which is not an ethical practice. Large brands and buyers have not taken any decisions yet. We hope that they will decide by today or tomorrow, as their working week has started," Rubel said.

It will be very difficult for exporters to absorb this. "We hope the brands will make their decisions with due consideration for the situation of their suppliers and the over 4 million workers in the apparel industry. We trust they will not abandon anyone," he added.