Bangladesh is scheduled to sign a trade agreement with the United States on Monday aimed at reducing reciprocal tariffs, with commitments to import more American goods to narrow a trade imbalance heavily favouring Bangladesh.
Under the proposed agreement, the US will not levy tariffs on garment items made from American raw materials such as cotton and exported to American markets, according to Commerce Secretary Mahbubur Rahman.
Besides, the Donald Trump administration will also reduce the reciprocal tariff rate further for Bangladesh as at least two advisers of the interim government said recently along with Secretary Rahman on several occasions.
However, they did not say exactly what percentage of the reciprocal tariff may be reduced for Bangladesh.
The arrangement is expected to offer substantial relief for Bangladesh’s garment sector. For instance, if a T-shirt contains 70 percent American cotton and yarn by value, US customs authorities will exempt that portion from the 20 percent reciprocal tariff imposed on Bangladeshi goods last year.
This matters significantly because garments account for nearly 95 percent of Bangladesh’s exports to the US, and many factories can use roughly 70 percent American materials in their products.
The prospect of preferential access has already shifted sourcing patterns. Imports of cotton and soybeans from America have increased as Bangladeshi millers and traders redirect their purchases from other countries.
The signing ceremony will be held in a hybrid format. Commerce Adviser Sk Bashir Uddin and Secretary Rahman will attend virtually, while a handful of senior commerce ministry officials will travel to Washington to attend in person alongside their American counterparts.
“We will send the documents to the US as only a few of our officials will fly there to attend the deal signing ceremony,” Secretary Rahman said.
The commerce adviser cannot attend in person because the government has only one working day before the national elections scheduled for February 12, he added.
The agreement follows intense negotiations to reduce the US tariff burden on Bangladesh. The country exports more than $8 billion worth of goods to the US but imports only $2 billion, creating a substantial trade gap.
In his Liberation Day announcement on April 2 last year, US President Donald Trump imposed a 37 percent additive reciprocal tariff on Bangladeshi exports. After negotiations, the Trump administration agreed to lower the rate to 20 percent in exchange for Bangladesh’s commitment to import more US products.
Bangladesh has pledged to buy American aircraft from Boeing, along with greater quantities of cotton, soybeans, liquefied petroleum gas and other goods to reduce the trade gap with the US. An agreement has been signed to import 3.5 million tonnes of wheat from America over five years, with approximately 660,000 tonnes already purchased.
Meanwhile, the Bangladesh Garment Manufacturers and Exporters Association said in a statement that negotiations with the Office of the United States Trade Representative (USTR) regarding the deal have been ongoing for over six months.
“Although we are informed that a formal trade deal will be signed on February 9, we urge the Ministry of Commerce and all parties negotiating with the USTR to ensure that the signing is completed within this timeframe so that Bangladesh can start preparing itself with the preferential deal of utilising US cotton to attain zero tariff access, which we understand as the centrepiece of the trade deal,” the association added.
