As Bangladesh and the United States wrap up the second round of high-stakes trade negotiations in Washington, both sides have reached consensus on 80% of the proposed conditions, but key issues, including a steep 35% US tariff on Bangladeshi exports and a contentious 40% local value addition requirement, remain unresolved.
The negotiations, held between 9th and 11th July, come ahead of the US government’s plan to implement reciprocal tariffs starting from 1st August, a move originally announced by former President Donald Trump in April. The stakes are high for Bangladesh, whose US $ 7.6 billion apparel exports to the US make up more than 17% of its total export earnings.
One of the most pressing issues is the US demand that Bangladeshi ready-made garments (RMG) meet a minimum 40% local value addition threshold to qualify for a “Made in Bangladesh” label and duty concessions.
Industry leaders fear this could devastate the woven garment segment, which heavily depends on imported fabrics, particularly from China. Approximately 70% of the fabric used in woven garments destined for the US is sourced from abroad, leaving the sector ill-equipped to meet the threshold under current capacity.
“It is impossible to achieve 40% value addition with imported fabric,” said Md Hafizur Rahman, former Director General of the Ministry of Commerce’s WTO Cell. “We must boost our backward linkage industries and produce fabrics locally to meet this requirement.”
Mostafa Abid Khan, former member of the Bangladesh Trade and Tariff Commission, also flagged concerns. “The US excludes producer profits in calculating value addition. Only domestic inputs and wages are counted, making it very hard for our woven exports to qualify,” he told TBS.
In contrast, the knitwear sector remains more secure, as up to 90% of its fabric requirements are met by local spinners.
BGMEA President Mahmud Hasan Khan Babu expressed frustration over being excluded from formal negotiations. “We were not included in the meetings, but were asked for some input on the final day. We shared our thoughts, and were informed that the proposed tariff might be reduced from 35%,” he said.
Babu noted that the association had no access to details about which points were agreed upon. “The government cited a non-disclosure agreement for withholding information. We don’t even know what the US said about Chinese investments,” he added.
Despite the opacity, BGMEA has indicated a willingness to accept the 40% value addition condition if the US lowers the reciprocal tariff to 15%.
However, he US has also raised red flags over rising Chinese investment in Bangladesh, especially amid growing concerns about the transfer of ownership of local firms to Chinese entities. While industry leaders argue that China’s investment in the RMG sector remains limited, the US reportedly continues to view the issue through a national security lens.
To address broader concerns, the two countries are working on a framework agreement that would incorporate both trade and security elements, confirmed Energy and Power Adviser Fouzul Kabir Khan. “They’re not only concerned about tariffs but also about how we’re engaging with other countries bilaterally,” he told reporters.
Adding to the complexity, the US has submitted a lengthy list of items for which it is seeking zero-duty access to the Bangladeshi market. Commerce Secretary Mahbubur Rahman acknowledged receipt of the list and said a follow-up inter-ministerial meeting would be held in Dhaka before finalizing Bangladesh’s stance.
Bangladesh already provides zero-duty access for several American products, including cotton, wheat, and soybean. However, the decision to expand that list will require cross-ministerial consultation.
With time running out before the 1st August deadline, a third round of negotiations is expected soon, possibly held virtually or in-person in Washington. Officials including Commerce Adviser Sheikh Bashir Uddin and Security Adviser Khalilur Rahman remain optimistic about reaching a mutually beneficial agreement before the new tariff regime is implemented.
Industry insiders are urging the government to push for a lower tariff range between 10% and 20%, while simultaneously strengthening local fabric production capacity to meet the looming value addition challenges.
