Bangladesh aims to counter potential tariffs from the Trump administration by importing more U.S. cotton, which may protect its apparel exports. With a significant trade deficit of $6.2 billion, the country plans to bolster local cotton production while facing challenges from tariff threats linked to its UN graduation. U.S. farmers are also dealing with their own economic pressures and tariffs from China.
Bangladesh is looking to mitigate potential tariffs from the Trump administration by increasing its imports of American cotton. According to foreign affairs adviser Md. Touhid Hossain, this strategy aims to balance the U.S. trade deficit, a priority for President Trump. In 2024, Bangladesh exported $2.2 billion worth of goods to the U.S. while imports amounted to $8.4 billion, leading to a significant trade deficit.
Currently, Bangladeshi apparel already faces tariffs, including a 15.6% duty. Hossain indicated that importing cotton from the U.S. then exporting cotton-based garments could discourage additional tariffs, stating, “By importing cotton from the U.S. and exporting garments made from it, we aim to create a situation where they hesitate to impose higher tariffs on us.”
Hossain emphasized the necessity for Bangladesh to increase its local cotton production, which currently meets only 3% of domestic needs. The government intends to classify cotton as an agricultural product and introduce subsidies to enhance its production soon. Furthermore, he urged the removal of an existing 4% advance income tax on domestically grown cotton to encourage local farming.
Additionally, Vietnam is facing similar challenges under the threat of tariffs induced by trade deficits. Recent discussions with U.S. officials focused on improving economic exchanges to reduce trade barriers affecting American investments.
An upcoming challenge for Bangladesh includes its potential graduation from the UN’s Least Developed Countries category next November, risking the loss of EU trade benefits. Post-graduation, tariffs on Bangladeshi apparel imports could increase significantly, possibly reaching 12% by 2029. Hossain mentioned that the impact of this status change should be manageable within a three-year grace period allowing businesses to prepare.
The effect of Bangladesh’s strategy on U.S. cotton farmers is uncertain since China has introduced a 15% tariff on U.S. cotton in retaliation for U.S. duties on Chinese goods. Simultaneously, U.S. farmers are grappling with rising costs and decreased commodity prices. To counteract these financial pressures, the U.S. Department of Agriculture plans to provide up to $10 billion through the Emergency Commodity Assistance Program for the upcoming crop year, targeting upland cotton and extra-long staple cotton farmers with payments of $84.74 per acre.
In summary, Bangladesh’s initiative to import more cotton from the U.S. is a strategic response to avoid increased tariffs amid ongoing trade tensions. The government plans to boost local cotton production alongside its international trade strategy. However, challenges from tariff increases following its potential graduation from the UN’s Least Developed Countries category and pressures on U.S. farmers continue to complicate the trade landscape. Overall, Bangladesh is positioning itself to navigate these complex trade dynamics effectively.
Original Source: sourcingjournal.com
