Bangladesh and the USA have maintained over 50 years of friendly diplomatic relations. This tie has significantly promoted trade and economic cooperation. Bilateral trade has gained momentum, reaching around $13 billion, with Bangladesh exporting around $10billion, primarily textiles and footwear, while importing around $3 billion, mainly cotton and chemicals. The USA is Bangladesh's largest export destination and also the largest FDI source for Bangladesh. The rapidly evolving geopolitical landscape has destabilized various global economic ties. Regional blocs, economic integration, political ties, and strategic alliances such as QUAD have reshaped global relations. Bangladesh, a relatively small yet emerging economy, has grown as a trading nation, backed by its longstanding foreign policy of "friendship to all, malice to none".
This policy has safeguarded our sovereignty and facilitated balanced cross-border economic relations. The economic superpower manages economic and political relations to the different economies to different scales. The USA manages its economic and political relations with other nations on varying scales. With a per capita income of $81,695 in 2023, the USA remains the top export destination for many countries. The total foreign trade of the USA is around $5.3 trillion, where import is $3.2 trillion. China, Japan, and Vietnam are major trading partners. Many Southeast and South Asian economies rely on the US market too.
Due to compounding reliance on the US market, changes in US trade strategies often make ripple effects across other countries. There is a saying "If the USA sneezes, the rest of the world catches cold,"which reflects the unprecedented dependence on the USA. The Trump administration's "America First" trade policy focuses on reducing trade deficit, protecting domestic industries, and promoting fair, reciprocal trade through tariffs and unfair trade practices. Bangladesh's RMG sector relies heavily on trade with the USA.
“The RMG industry saw remarkable growth in the mid-1990s, aided by the US-backed export Quota system till 2004. But, situation has changed now”
The RMG industry saw remarkable growth in the mid-1990s, aided by the US-backed export Quota system till 2004. But, situation has changed. The Trump administration's aggressive escalation of tariff has reached a new peak, with both the U.S. and China imposing retaliatory duties that are adversely impacting global supply chains. The re-election of Donald Trump in 2024has significant implications for Bangladesh's trade and economic relations with the USA. The "America First" policy has regained momentum, emphasizing protectionism, development of industries, and stricter trade terms. The initiation of tariff war and domestic economic interests signal potential challenges for export-oriented economies like Bangladesh. While Democratic administrations typically advocate multilateralism and global cooperation, the current Republican leadership focuses on trade imbalance reduction. Despite differing foreign policy strategies, both parties maintain a tough stance on China. In this evolving geopolitical state, Bangladesh must recalibrate its trade and economic strategies with the U.S.A.
The US-China trade war, which began in 2017, saw the USA withdraw from the Trans-Pacific Partnership (TPP) and imposed tariff on $500 billion worth Chinese imports. Despite the rivalry, both nations remain interdependent in sectors such as electronics, semiconductors, and ICT. Interestingly, due to this trade conflict, the USA's external trade with the rest of the world has expanded by 38%.Recently, under the renewed Trump administration, the United States escalated the trade conflict by imposing a 145% tariff on specific Chinese goods, prompting China to retaliate with a125% tariff on strategic U.S. products.
This tariff imposition signals a deepening of economic confrontation risking other emerging economies. Amidst this scenario, Bangladesh has to safeguard by adopting proactive measures such as diversifying export markets, enhancing local industrial competitiveness.
The US trade war with China led to broader economic implications for many countries. Previously, President Biden has sought to unfreeze some of the strict sanctions imposed by the Trump's administration. These historical precedents illustrate how the political landscape in the US can impact trade dynamics. The Republican created an uncertain trade atmosphere. In the context of complex global politics, we believe "economy first" strategy is our key tool.
In the recent context, US foreign trade policy with Bangladesh slightly changed. The USA has imposed 37% tariff on imported goods from Bangladesh. Earlier Bangladesh's GSP facility with the USA was suspended due to catastrophic fire and building collapse accidents in 2012 and 2013. Consequently, labor law reforms for fire and structural safety became priority agenda. The US and Bangladesh diplomatic relation has shifted slightly during our last government but it has not significantly impacted our economic relation. US-Bangladesh relation is even more fractured today. If Washington had simply ignored the increasing political repression in Bangladesh during the last election, it would have betrayed US values. Washington perceives relations with Bangladesh as a means of "balancing" relations with India. Both countries are interconnected but tend to follow different tracks and have different levels of priority.
India and Bangladesh's diplomatic relations have become frail in recent history, which caused many adverse effects on trade relation. Trade declined by around 40% immediately after the regime change in Bangladesh. India has imposed several restrictions, including the suspension of transit facilities. The USA perceives India could be one of the trusted allies in this region to dominate.
The recent 37% tariff hike for our US bound export has become a bolt from the blue, adding huge concerns on our external trade and local economy. Our leadership can bear significant outcome in overcoming the reciprocal tariff challenges and ensure result-oriented mutually beneficial trade adjustments through a win-win negotiation.
Alongside, tariff rationalization on US import need logical rationalization. In the given economic context, Bangladesh needs to map out strategies to cope with the new US regime. With Trump now in power, the dynamics of US-Bangladesh relations will depend heavily on long-term negotiations, cooperation, and the effective implementation of agreements. This external economic blow amidst our graduation transition adds more concerns. While the trade and strategic interests between the two countries are likely to persist, they may require adjustments in response to evolving circumstances. Our strategic approach will be critical in maintaining smooth relation with the USA, ensuring the best economic outcomes for Bangladesh through structured dialogue.
