Trump's Trade Wars: A Threat to Global Economy and Bangladesh's RMG Industry

Strategic Insights -

The Trump administration's recent tariffs on US trading partners, including Bangladesh, have sparked concern among economists and policymakers worldwide. The move represents a departure from the post-war global trading system established by the General Agreement on Tariffs and Trade (GATT) and later adopted by the World Trade Organization (WTO). The tariffs will create an environment of uncertainty, which is detrimental to trade and economic growth. Specifically, the impact on Bangladesh's RMG industry will be severe, with the industry facing a 50% average tariff rate, up from 15.7% previously. This could lead to factory closures, worker layoffs, and a decline in economic growth.

Key Takeaways:

  • The Trump administration's trade war could lead to a global trade war, reminiscent of the 1930s, which could create conditions for another World War.
  • Bangladesh's RMG industry is particularly vulnerable, with a 50% average tariff rate expected, up from 15.7% previously, which could wipe out its price competitiveness.
  • The industry employs over 4 million people, mostly women, who are experiencing rising job insecurity and reliance on regular wages to meet expenses.
  • The flow-on effects of decreased export earnings will negatively impact macroeconomic stability and exacerbate the balance of payments crisis.
  • Bangladesh's trade delegation has been successful in negotiating a reduced tariff rate of 20% for its RMG exports, lower than its competitors in the US apparel market.
  • India, however, faces a 50% tariff on its exports to the US, citing its economic ties with Russia, and is making significant profits from re-exporting Russian oil.
  • Bangladesh has agreed to import 700,000 metric tons of wheat annually from the US for five years as part of a trade deal.
  • The US is seeking to expand its market access for agricultural products to bridge a trade gap, which may pose a threat to Bangladeshi agricultural activities and small farmers.

Statistics:

  • 80% of Bangladesh's total exports are RMG, making it the country's competitive advantage.
  • The RMG industry contributed 8% to the country's GDP in 2024-25.
  • Over 4 million people are employed in the RMG industry, with the majority being women.
  • Bangladesh's trade surplus with the US in 2024 was US$6.2 billion.
  • The average nominal tariff rate for imports into Bangladesh stands at 28% and the total tax incidence is 54%.
  • India purchased US$133.4 billion worth of oil from Russia last year.
  • US farmers are expected to reap significant benefits from Trump's trade tariffs, including higher revenue and reduced competition.

Sources:

  • FE (August 7)
  • [1] Trump's trade war: A threat to global economy and Bangladesh's RMG industry
  • [2] Bangladesh's RMG industry faces 50% tariff rate
  • [3] India's economic ties with Russia spark Trump's wrath
  • [4] Bangladesh to import 700,000 metric tons of wheat from US
  • [5] US seeks to expand agricultural exports to Bangladesh