PHOTO: REUTERS/FILE

ZAHID HUSSAIN

On April 2, 2025, US President Trump introduced sweeping reciprocal tariffs, effectively reversing nearly all US tariff liberalisation since the Great Depression of the 1930s.

The average US tariff surged from 2.5 percent to 20 percent with a single executive action. This move signals the onset of a global tariff war reminiscent of the Smoot-Hawley Tariff of 1930, which imposed a 20 percent duty on 20,000 imported items.

While its intention was to protect American farmers and businesses, it had unintended consequences that exacerbated the Great Depression. The act led to retaliatory tariffs from other countries, significantly reducing international trade by 67 percent between 1929 and 1934.

Reciprocal tariffs set US tariff rates to match the highest levels imposed on American exports, with potential reductions contingent on meeting specific demands.

President Trump justifies this policy as a measure to protect US industries and correct trade imbalances, asserting that the US has been unfairly treated by other nations. Viewing trade as a zero-sum game, he argues that lower import tariffs compared to export tariffs disadvantage the US Rejecting free trade agreements, his goal is to realign trade dynamics in favour of the United States.

An overview of the new tariff regime

Bangladesh now faces a 37 percent reciprocal tariff. In 2023, Bangladeshi imports to the US were subject to an average tariff of 15.7 percent, generating $1.02 billion in customs duties on $8.28 billion worth of goods.

Tariffs play a significant role in Bangladesh’s trade policy and revenue generation, with an average applied MFN tariff of 14.8 percent. Agricultural products face higher protection at 18.1 percent, compared to 14.1 percent for non-agricultural goods.

Textiles and apparel, already burdened by some of the highest US tariffs, continue to face challenges. Pew Research highlights the disproportionately high taxes on clothing and footwear imports from Bangladesh in the US Despite this, Bangladesh is subject to reciprocal tariffs due to USTR estimates that the combined tariff, para-tariff, and tariff equivalent of non-tariff barriers against US imports into Bangladesh is 74 percent.

President Trump claims to be generous by offering a “kind reciprocal tariff discount” of 50 percent to all countries, including Bangladesh.

Amidst this drastic shift in US trade policy, there is a silver lining: competitors face similar or even higher reciprocal tariffs.

For example, Vietnam is subject to 46 percent, India 26 percent, Cambodia 49 percent, Sri Lanka 44 percent, Thailand 36 percent, Pakistan 29 percent, Myanmar 44 percent, Laos 48 percent, China 34 percent, and Indonesia 32 percent.

India’s 26 percent and Pakistan’s 29 percent are not too far behind. This suggests that Bangladesh’s competitiveness relative to its rivals remains largely unchanged.

However, this offers little comfort in the face of a potential global demand contraction triggered by the Trump tariffs. If tit-for-tat dynamics escalate, it remains uncertain whether Trump will reverse course, as he did earlier this year with Canada, Mexico, and China.

What should Bangladesh do?

The immediate priority is damage control, as the reciprocal tariffs are already in effect, with no time allowed for a smooth transition. Even goods currently en route to the US will be subject to the new tariffs, raising the critical question: Who will bear the cost?

Our strategy should aim to shift the tariff burden onto buyers. A key advantage is that buyers have