Tariff relief offers hope, but deeper reforms essential: Economists

The United States’ decision to reduce reciprocal tariffs on Bangladeshi exports, from 35% to 20%, has been welcomed by economists as a significant breakthrough. However, they warn that without urgent structural reforms, greater transparency and improved trade capacity, the long-term benefits of the move could remain out of reach.

Experts said the tariff cut improves Bangladesh’s position in the US market relative to key competitors such as India, Vietnam and Pakistan. Still, they caution that systemic issues, such as governance challenges, weak labour compliance and inefficient trade logistics, must be addressed to fully capitalise on this opportunity.

While the reduction offers short-term relief for export sectors, particularly ready-made garments (RMG), economists agree it is only the beginning of a longer process. To ensure lasting gains, they urge the government to strengthen negotiation capacity, improve transparency and invest in long-term trade competitiveness.

Tariff cut offers opportunity, but structural challenges remain: Zahid Hussain, former lead economist, World Bank (Dhaka)

Zahid Hussain called the tariff cut “a step in the right direction,” but pointed out that a 20% duty is still relatively high.

“The good news is that we are no longer in the extremely risky position we were in before,” he said.

Hussain believes the fear of losing market share to India has now subsided. “We may even reclaim some of the ground we lost. The perception that India would dominate this space is shifting.”

He noted that while Vietnam enjoys comparable tariffs, it also benefits from Chinese transshipment routes that Bangladesh lacks.

“Nonetheless, Bangladesh has competitive advantages in production capacity, which gives it an edge.”

“Compared to Vietnam, India and Pakistan, our relative position is favourable,” Hussain added.

“Even though Pakistan may enjoy slightly lower tariffs, its weak production base and political instability make it less attractive to buyers.”

However, he stressed that tariffs alone will not drive export growth. “Those who can deliver quickly and reliably will gain the most. Fixing our supply chain is critical.”

He also emphasised the broader message from Washington, “The US has consistently raised concerns over labour rights, environmental compliance, corruption and business climate. Addressing these issues is essential to secure future trade benefits.”

Deal brings relief, but transparency and strategic planning are key: Towfiqul Islam Khan, senior research fellow, CPD

Towfiqul Islam Khan welcomed the tariff reduction but warned that its scope goes beyond just trade rates.

“This was not merely about tariffs, non-tariff components were also involved, such as agreements to purchase wheat and Boeing aircraft,” he said.

“In the absence of a functioning parliament, it is vital that the government disclose all relevant details of the deal. Transparency is non-negotiable.”

Khan emphasised the importance of learning from this experience. “We must build negotiation capacity, diversify our export base and develop forward-looking strategies to handle future trade challenges.”

He also urged caution, citing the unpredictability of US policy. “Given the erratic nature of the Trump administration, more negotiations – or even reversals – could follow. Nothing is guaranteed.”

Tariff gain a strategic win, but broader reform still needed: Selim Raihan, executive director, SANEM

Selim Raihan said the 20% tariff rate gives Bangladesh a competitive edge. “We are now better positioned than India, which faces a 25% rate and on par with Vietnam. This reduces the risk of trade diversion.”

He said other regional players have also negotiated favourable terms – Sri Lanka saw tariffs reduced from 30% to 20% and Pakistan from 29% to 19%.

Still, Raihan pointed to lingering uncertainty surrounding US tariffs on Chinese goods. “If tariffs on China rise, Bangladesh could gain from trade diversion. But if China negotiates better terms, our competitive edge could weaken.”

Echoing concerns about transparency, he said, “While we know about purchases of wheat, cotton and Boeing aircraft, there may be confidential components in the deal. These must be clarified to ensure accountability.”

Raihan concluded with a call for comprehensive reform. “To sustain export growth, we must diversify our product base, forge regional trade agreements and improve the investment climate. These are the foundations of long-term resilience.”