Unresolved Trade Tensions: Bangladesh-US Tariff Talks Conclude Without Breakthrough

Dhaka/Washington D.C. – The highly anticipated second round of Bangladesh-US Tariff Talks concluded in Washington D.C. this week without a definitive resolution, leaving a shadow of uncertainty over the future of bilateral trade. Despite three days of intense negotiations, key disagreements persisted, particularly concerning the impending 35% tariff on Bangladeshi goods and stringent new demands for local value addition.

The talks, held from July 9 to July 11, 2025, saw delegations from both nations engage in comprehensive discussions covering various aspects of their trade relationship. While both sides reported consensus on several minor issues, the core contentious points remained unresolved, necessitating further inter-ministerial dialogue and future bilateral meetings.

The Impending Tariff and Its Genesis in Bangladesh-US Tariff Talks

At the heart of the current trade friction is US President Donald Trump’s announcement of a 35% tariff on all Bangladeshi products entering the United States, effective August 1, 2025. This move, communicated in a letter to Bangladesh’s Chief Adviser just days before the July 9 deadline, stems from the US administration’s long-standing concerns over persistent trade deficits and what it perceives as Bangladesh’s non-reciprocal tariff and non-tariff policies.

President Trump’s letter emphasized the non-reciprocal nature of the trade relationship, stating that the 35% tariff is “far less than what is needed to eliminate the Trade Deficit disparity.” The letter also warned that any retaliatory tariff hikes by Bangladesh would lead to further increases in US tariffs. This aggressive stance by the US has set a challenging backdrop for the ongoing Bangladesh-US Tariff Talks.

Key Obstacles in Bangladesh-US Tariff Talks: The 40% Value Addition Demand

Beyond the 35% tariff, a significant hurdle in the Bangladesh-US Tariff Talks is the US demand for a minimum 40% local value addition for “Made in Bangladesh” goods, especially ready-made garments (RMG), to qualify for the US market. This “Rules of Origin” requirement poses a formidable challenge for Bangladesh’s export-oriented industries.

Industry insiders and economic experts in Bangladesh fear that if this 40% threshold is strictly enforced, it could severely impact the country’s woven export sector. A substantial portion of the woven fabric used in Bangladeshi garments, particularly for trousers and shirts destined for the US, is sourced from China. Bangladesh currently lacks the robust backward linkage capacity to quickly reduce its reliance on imported materials in this segment. Experts warn that achieving a 40% value addition is “impossible” when garments are made from imported fabric, as the US calculation method only considers the cost of domestic inputs and workers’ wages, excluding producer profits. This element became a major point of contention during the Bangladesh-US Tariff Talks.

Delegations and the Path Forward for Bangladesh-US Tariff Talks

The Bangladeshi delegation was led by Commerce Adviser Sheikh Bashir Uddin, with National Security Advisor Dr. Khalilur Rahman and Special Assistant to the Principal Adviser Faiz Tayyab participating virtually from Dhaka. Senior government officials and experts from various ministries also joined the discussions. The US side was led by US Trade Representative Ambassador Jamieson Greer.

Despite the inconclusive end, both sides expressed a cautious optimism about future engagements. Sheikh Bashir Uddin and Dr. Khalilur Rahman expressed hope that a “positive position can be reached within the stipulated time.” The agreement to continue inter-ministerial talks and schedule further bilateral meetings, either virtually or face-to-face, indicates a mutual desire to find common ground. The timing and date for the next round of Bangladesh-US Tariff Talks are expected to be finalized soon.

Implications and Outlook for Bangladesh-US Tariff Talks

The lack of a concrete agreement from these Bangladesh-US Tariff Talks means that the 35% tariff is still slated to take effect on August 1, 2025. This could have significant ramifications for Bangladesh’s economy, particularly its RMG sector, which relies heavily on the US as its largest single-country export market. The potential for increased production costs due to tariffs and the demanding value-addition rules could force Bangladeshi exporters to bear additional burdens or seek alternative markets. Some US buyers have already begun exploring alternative sourcing options or halting order placements due to the uncertainty.

However, the continued dialogue provides a glimmer of hope. Both nations are key trading partners, and a prolonged trade dispute would be detrimental to both economies. The ongoing Bangladesh-US Tariff Talks highlight the complexities of modern international trade, where economic interests intersect with geopolitical considerations. The coming weeks will be crucial as both sides prepare for the next phase of discussions, aiming to mitigate potential trade disruptions and forge a more reciprocal and equitable trading relationship. The global community will be keenly watching to see if a breakthrough can indeed be achieved before the August 1 deadline, ensuring stability in the vital trade corridor between Bangladesh and the United States.