Bangladeshi exporters are likely to absorb around 40% of the tariffs they may face after the expiry of the grace period following the country’s graduation from least developed country (LDC) status, according to a recent study.
The study indicated that in the post-2029 period Bangladesh could face tariffs of about 12% on exports to the European Union, while competitors such as Vietnam, Pakistan and Sri Lanka would continue to enjoy zero-duty access under free trade agreements or the EU’s GSP+ scheme.
The findings were presented by Deen Islam, an associate professor at the University of Dhaka, at a seminar titled Assessing Tariff and Exchange Rate Pass-through in Apparel Export Policies in the European Union: LDC Graduation Implications for Bangladesh. The event was organised by the Research and Policy Integration for Development and the International Growth Centre at Dhaka University.
According to the study, for every 10% tariff imposed by the EU, Bangladeshi exporters would reduce their pre-tariff prices by about 4% in an effort to remain competitive. The research also found that the top ten Bangladeshi apparel items are priced, on average, about 36% lower than comparable products from China and Vietnam, while even Cambodia, another LDC, achieves higher average prices than Bangladesh.
Bangladesh is scheduled to graduate from the LDC category in 2026, with a transition period allowing the temporary continuation of certain trade preferences. Experts at the seminar noted that graduation could pose significant challenges, as exporters may have to bear a substantial share of tariff costs. However, they said early and coordinated preparation could help mitigate the impact.
The study highlighted that exporters are already operating on thin profit margins, leaving limited scope to absorb additional tariff costs without financial strain. It also examined how exporters adjust prices in response to exchange rate movements, noting that an appreciating currency has been eroding competitiveness.
Between 2012 and 2022, the taka appreciated significantly in real terms against the currencies of key competitors such as China, Vietnam and Cambodia, the study found. This trend has made Bangladeshi exports progressively more expensive relative to rivals, weakening cost competitiveness even before the potential tariff shock. The woven apparel sector was identified as particularly vulnerable due to its heavy dependence on imported raw materials, including fabrics.
The study recommended that the government and exporters focus on securing market access through diplomatic and trade negotiations, strengthening supply chains and the overall business environment, pursuing industrial strategy, diversifying products and markets, and enhancing backward linkages.
Speaking at the seminar, Munir Chowdhury, national trade expert for the World Bank–initiated Bangladesh Regional Connectivity Project, said Bangladesh faces a serious gap in trade diplomacy and negotiation capacity, which could undermine export competitiveness after LDC graduation. He said that without skilled trade negotiators and a strategic approach, the country risks falling behind its competitors.
He noted that rival countries are actively negotiating favourable trade agreements, while Bangladesh has yet to secure similar arrangements. He pointed out that Vietnam will continue to enjoy zero-duty access to the EU under its free trade agreement, whereas Bangladesh could face tariffs of around 12% after the grace period if it fails to conclude an FTA. Such tariffs, he warned, would have a severe impact on the readymade garment sector, which accounts for the majority of Bangladesh’s export earnings.
He argued that Bangladesh should immediately establish a dedicated trade negotiation pool or a specialised government wing to conduct trade talks in a professional and coordinated manner. He also stressed the importance of capacity building, data-driven negotiation strategies and better alignment of trade-related policies. In addition, he highlighted the growing importance of non-tariff barriers, citing logistics efficiency, lead time, ports and transport as critical factors.
Md Mamun-Ur-Rashid Askari, joint chief of the Bangladesh Trade and Tariff Commission, said at the event that the success of free trade agreements and negotiations largely depends on the skills of negotiators. He said agreements could be concluded in a relatively short time if both parties are convinced. He also noted that Bangladesh is currently engaged in another round of FTA negotiations with South Korea, with the second round expected to take place in January.
