NextFin news, Bangladesh's ready-made garment (RMG) sector, a linchpin of the country's export economy, experienced a marked decline in shipments to the United States in the latter half of 2025. According to the Export Promotion Bureau (EPB) data published in early October 2025, exports for September alone fell 4.6% year-on-year to $3.62 billion, with garment exports dropping 5.66% to $2.83 billion. This downturn was predominantly influenced by the increased tariffs levied by the US government under President Donald Trump's administration, which took effect as of August 7, 2025, intensifying trade costs for Bangladeshi exporters.
These tariff adjustments raised duties on apparel imports from Bangladesh within the Trump administration's reciprocal tariff framework, applying a 20% tariff rate—considerably higher than previous levels and designed to protect US manufacturing interests. The rise in tariffs has led to a noticeable retreat in US import orders for Bangladeshi garments during August and September, following an early surge in shipments that was attributed to pre-tariff hike stockpiling by American retailers and brands. Industry leaders like Inamul Haq Khan, senior vice-president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), described the drop in exports as a 'normal adjustment' period as the market responds to the new cost environment.
Despite this recent softness in monthly export figures, quarterly data presents a more nuanced picture. For the July–September 2025 period, Bangladesh's overall RMG exports to the US showed a 5.64% increase to $12.31 billion, with knitwear and woven garments growing by 4.31% and 5.41%, respectively. Exporters remain cautiously optimistic that US buyers are recalibrating to the higher tariff structure and may resume larger sourcing volumes as the market settles into this new pricing regime.
Yet, the tariffs' imposition has catalyzed more profound shifts, not only in direct cost burdens but also in global trade dynamics and competitive positioning. The Research and Policy Integration for Development (RAPID) project projected that Bangladesh's US apparel exports may shrink by approximately 14.3%, equating to a potential loss of $1.25 billion, with about $1.08 billion affecting specifically the apparel segment. These projections underline the significant threat tariffs pose to Bangladesh's export revenues and the country's broader economic health, given RMG exports constitute around 84% of total export earnings.
Several critical trade effects are observed. Firstly, the phenomenon of trade destruction occurs as higher tariffs elevate final consumer prices in the US, thereby reducing demand for Bangladeshi imports. US consumers, facing higher retail prices reflecting tariff pass-through, adjust consumption patterns, impacting order volumes. Secondly, trade diversion creates a realignment in sourcing patterns. Notably, competing garment-exporting countries with differing tariff rates, such as Vietnam and Pakistan, may benefit by attracting orders diverted from nations suffering steeper tariff hikes. On the other hand, India's 50% tariff under the Trump regime triggered some of its apparel orders to divert towards Bangladesh, presenting Bangladesh with a mixed competitive advantage.
This interplay has introduced margin pressures as Bangladeshi exporters reportedly absorb 12–14 percentage points of the 20% tariff through reduced factory prices (FOB prices), a higher share than the traditional cost-sharing norm between manufacturers and buyers. While this strategy cushions US buyers from full price hikes, it compresses supplier profitability and may challenge the sustainability of cost advantages.
Furthermore, the imposition of these tariffs coincides with a depreciating US dollar, which has recorded a 6.2% decline against other currencies mid-2025. Because Bangladesh prices most exports in USD, a weaker dollar may partially mitigate volume losses in non-US markets by making Bangladeshi goods more competitively priced globally. This currency dynamic could offer limited relief but does not fully offset US market contraction risks.
The strategic responses for Bangladesh involve leveraging this transitional period to solidify longer-term buyer relationships, beyond the immediate tariff-driven sourcing shifts. Reliance on transient duty advantages risks eroding if global competitors adjust by entering alternative markets. Additionally, Bangladesh must navigate increased competition in Europe, where Indian and Chinese garment exporters, sidelined by US tariffs, intensify price and volume competition, undermining Bangladesh's market share and margins.
Looking forward, the persistence of Trump's tariff policy is uncertain but currently entrenched. The elevated cost base for exports has sparked discussions on diversifying export destinations and enhancing value chain efficiencies to maintain competitiveness. These tariff-induced disruptions compel Bangladesh's RMG sector stakeholders to innovate in productivity, compliance, and product differentiation to sustain growth amid shifting geopolitical trade landscapes.
In summary, while Bangladesh's RMG sector retains foundational strengths in global apparel exports, the 2025 Trump tariffs have caused measurable declines in US market shipments, altered competitive dynamics with India and other exporters, and created uncertainty for future growth. The sector's resilience will depend on adaptive strategies addressing tariff impacts, global trade realignments, and currency fluctuations, underscoring a critical inflection point for Bangladesh's export-driven economy.
According to The Business Standard and Export Promotion Bureau reports, this tariff-induced export decline is expected to shape Bangladesh's trade trajectory significantly in the coming fiscal periods.
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