The real problem for Bangladesh’s $47 billion garment industry lies deep in the technical details of the new trade deal with the US. When Dhaka and Washington signed the reciprocal trade agreement on February 9, it was celebrated as a diplomatic success. But that early optimism has now turned into confusion over the “cotton clause” -- a vague rule that waives “reciprocal tariffs” only if garments are made with American cotton.
For a country where garments make up 86 percent of total merchandise exports to the US, this deal has created uncertainty that threatens its expected benefits.
The main concern is how the new tariff system works. Under the deal, Bangladesh faces a 19 percent reciprocal tariff on top of the existing most-favoured-nation (MFN) duty of about 16.50 percent. Without any relief, the total tax on Bangladeshi garments entering the US market rises sharply to 35.5 percent.
Commerce Adviser Sk Bashir Uddin tried to reassure the industry at a press conference on February 10, saying the reciprocal tariff would be removed for garments made with US cotton. However, industry leaders warn that removing the reciprocal tariff does not mean the products become duty-free.
“The US will not waive the previous duty that was in place before signing the deal,” said Mahmud Hasan Khan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
He explained with a simple example: if a US retailer buys a T-shirt from Bangladesh for $2, the 19 percent reciprocal tariff may be removed if US cotton or man-made fibre is used. But the export will still face the basic 16.50 percent duty. So, even with the concession, the cost of entering the US market remains high.
Another issue, according to trade analysts, is the unclear wording of the concession. Article 5.3 of the agreement says the US will create a system for “zero reciprocal tariffs”, but only for a “to-be-specified volume” of imports. This limit will depend directly on how much US cotton and man-made fibre Bangladesh imports. In simple terms, the duty benefit is not unlimited -- it is tied to the amount of raw materials Bangladesh buys from the US.
This effectively means that for every dollar of tariff the US removes, the benefit goes back to its own cotton producers.
“We are waiting for clarification as we need further interpretation of how this method will work,” Khan told The Daily Star, noting that many details remain unclear.
Mohammad Abdur Razzaque, chairman of the think-tank RAPID, said the agreement text is “full of ambiguity” and “not well negotiated”. He warned that the deal appears to be a strict trade-off: Bangladesh gets tariff relief only if it uses American raw materials. He also pointed out that it is still unclear whether the full waiver applies to garment accessories, or whether those items will face separate tariffs.
The geopolitical risks are also significant. Analysts warn that if India receives the same “cotton clause” benefits, Bangladesh could lose its competitive advantage in the US market. “If India gets the same benefit, Bangladesh may not remain in a strong position in the US market,” said Razzaque.
For Bangladesh, the path remains perilous. If the government can clarify the textile clause, the country may still benefit. But if the system proves too complicated, or if competing countries receive similar terms, the much-celebrated deal may offer little real protection for Bangladesh’s garment industry, according to analysts.
