The US has reduced the reciprocal tariff on Bangladeshi exports to 19% following the signing of a bilateral trade agreement under which Bangladesh RMG exports made of cotton and synthetic fibers imported from America will enjoy zero reciprocal duty, Commerce Secretary Mahbubur Rahman said today (9 February).
Commerce Adviser Sk Bashir Uddin and US Trade Representative (USTR) Jamieson Greer signed the agreement on behalf of the respective country in Washington around 10pm Bangladesh time today, the commerce secretary told The Business Standard.
Khalilur Rahman, national security adviser, Lutfey Siddiqi, special envoy of Chief Adviser Muhammad Yunus, and the commerce adviser virtually joined the signing ceremony from Bangladesh.
The revised tariff rate places Bangladesh in a relatively competitive position among major apparel exporters to the US. While Vietnam, Bangladesh's closest competitor, faces a 20% reciprocal tariff, India has secured a slightly lower rate of 18%. Pakistan, Cambodia and Indonesia have also been subjected to a 19% tariff.
China remains the largest apparel exporter to the US, followed by Vietnam. Bangladesh currently holds the third position, with India ranking fourth.
The US had imposed a 20% reciprocal tariff on Bangladeshi goods in August last year, prompting Dhaka to negotiate to secure a reduction. Policymakers had earlier indicated that the tariff could be brought down to 15%.
The commerce secretary said the US has not offered a 15% reciprocal tariff to any country in the region, adding that the recently concluded US-India trade deal may have influenced Bangladesh's outcome, possibly due to geopolitical considerations.
Former WTO Cell director general at the commerce ministry Md Hafizur Rahman said India benefited from greater flexibility in negotiations with the US because of its free trade agreement with the European Union. However, he downplayed concerns over Bangladesh's competitiveness.
"Even with a 19% tariff, Bangladesh will not face difficulties competing with India in the US apparel market," he told TBS, citing Bangladesh's lower labour costs and production expenses.
In addition to tariff adjustments, the agreement includes several trade and strategic commitments. The US will allow duty-free access for garments manufactured in Bangladesh using imported US cotton, potentially benefiting both countries' textile supply chains.
The commerce adviser said Bangladesh has also agreed to purchase 25 aircraft from US aerospace giant Boeing, with an estimated cost of Tk30,000-35,000 crore as part of broader efforts to ease trade tensions.
The deal further includes provisions for importing cotton, wheat, soybean and LNG from the US, refraining from imposing tariffs on e-commerce, complying with US-mandated intellectual property rights standards, and supporting US proposals for reforming the World Trade Organization.
The government is expected to formally brief the public on the agreement through a press conference tomorrow.
According to the Export Promotion Bureau, the US remains Bangladesh's largest export market.
Last fiscal year, exports to the US amounted to $8.69 billion, including $4.95 billion in woven garments (27.21% of total woven exports) and $2.60 billion in knitwear (12.27% of total knitwear exports). Home textiles exports reached $150 million, while cap exports stood at $259 million.
According to the Bangladesh Textile Mills Association, Bangladesh imported $346 million worth of US cotton in FY25, up from $278 million in the previous FY. US cotton accounted for 10% of Bangladesh's total cotton imports last fiscal year.
In July last year, the Trump administration proposed an additional 35% reciprocal tariff on Bangladesh, along with 90 other countries.
Subsequently, after several rounds of negotiations covering 100 US products, duty-free access, and increased imports, Washington reduced Bangladesh's reciprocal tariff rate to 20%, effective from 1 August.
Bangladesh to buy 25 Boeing aircraft at an estimated cost of Tk30,000-35,000 crore.
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Commerce Adviser Sheikh Bashir Uddin has said that Bangladesh can withdraw from the reciprocal tariff agreement signed with the United States by issuing a formal notice, should the next government choose to do so, as the deal includes an exit clause.
He disclosed the information at a press conference held at the Ministry of Commerce in the Secretariat today (10 February), a day after Bangladesh and the US signed the reciprocal tariff agreement.
The commerce adviser said the agreement contains a provision allowing either country to withdraw, if necessary, by serving an appropriate notice. "We were mindful of the next government while negotiating the deal. If a future government feels that the agreement is not suitable for any reason, this clause allows them to exit," he said.
Commerce Secretary Mahbubur Rahman said the agreement allows withdrawal with two months' notice, adding that the deal will come into force once both countries issue formal notifications.
On 2 April 2025, the United States imposed reciprocal tariffs on several countries at varying rates to reduce its trade deficit.
Initially, the Trump administration imposed a 37% reciprocal tariff on Bangladeshi products. After negotiations, the rate was reduced to 20% in August. Following nine months of talks, the two countries signed the agreement on 9 February, further reducing the reciprocal tariff to 19%.
Under the agreement, Bangladesh's main export item -- ready-made garments -- will enjoy zero reciprocal tariff if produced using US-origin cotton and man-made fibres.
At the press conference, the commerce adviser said Bangladesh exports goods worth around $8 billion to the US, and has a trade surplus of $6 billion. Overall, he said, the 19% reciprocal tariff will apply to only around 10% of Bangladesh's exports.
Noting that the US economy is worth $36 trillion, the adviser said its import demand is enormous, creating vast export opportunities for Bangladesh.
He also noted that Bangladesh imports agricultural products such as wheat, maize, and oilseeds worth around $15 billion annually, adding that the notion that Bangladesh is fully self-sufficient in food is incorrect.
Commerce Secretary Mahbubur Rahman said the US has introduced a tariff benefit called "Potential Tariff Adjustment for Partner Countries," which will take effect on the day the agreement comes into force. This benefit will apply to partner countries that have signed reciprocal tariff agreements with the US.
Under the scheme, the US has granted duty-free benefits on more than 2,500 items. Among products Bangladesh produces, pharmaceuticals top the list, meaning all medicines and pharmaceutical raw materials will enjoy duty-free access. Other eligible items include certain plastic products, aircraft parts, plywood, particle boards, agricultural products, and fishery items.
The commerce adviser said the agreement will significantly benefit the textile, spinning, and weaving sectors by enabling double-stage transformation. He added that while Bangladesh had pursued a free trade agreement (FTA) with the US, Washington was not interested in signing one.
The commerce secretary said the agreement initially did not include enforcement or exit clauses, but Bangladesh successfully negotiated their inclusion.
Responding to a question on whether the agreement includes provisions requiring Bangladesh to reduce imports from third countries or meet additional US demands, the commerce adviser said no such conditions were included.
The commerce secretary added that while such issues were initially raised, Bangladesh refused to accept them. "We made it clear during negotiations that we could not include any provisions that would create sensitivity or discrimination against other countries," he said.
Exit clause included in the agreement keeping next government in mind, says adviser.
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Bangladesh has agreed to abolish the long-standing requirement for non-life insurers to reinsure at least 50% of their business with state-owned Sadharan Bima Corporation (SBC), marking one of the most significant financial sector reforms embedded in the newly signed US-Bangladesh Agreement on Reciprocal Trade.
Under the existing regime, all non-life insurers are required to cede half of their reinsurance portfolio to SBC, effectively guaranteeing the state-owned reinsurer a steady stream of premium income.
The new trade deal commits Dhaka to removing this mandatory cession requirement, including for US insurers, opening the market to full competition.
The move represents a structural shift in Bangladesh's insurance and reinsurance architecture, which has for decades operated under a protectionist framework designed to shield the national reinsurer.
Industry insiders say the decision will liberalise the reinsurance market, allowing private and foreign reinsurers to compete freely without being forced to route business through SBC.
US insurers and global reinsurance firms are expected to be among the primary beneficiaries, while domestic insurers will gain greater flexibility in selecting reinsurance partners based on pricing, capacity and risk diversification.
However, the reform is likely to significantly erode SBC's dominant position.
The state-owned reinsurer has historically relied on compulsory cessions to secure predictable premium flows.
Without that guaranteed pipeline, it may face mounting competitive pressure to improve underwriting standards, pricing and operational efficiency.
The issue has already triggered concern within policy circles.
On 11 November last year, SBC sent a letter to the Financial Institutions Division of the Ministry of Finance warning against the removal of the mandatory reinsurance clause.
In the letter, the corporation argued that repealing the provision would allow local insurers to reinsure abroad without restriction, potentially leading to substantial foreign currency outflows.
It also cautioned that unrestricted overseas reinsurance could increase the risk of money laundering through premium payments.
Analysts say the foreign exchange dimension could be particularly sensitive at a time when Bangladesh continues to manage dollar shortages under an IMF-supported reform programme.
A larger share of reinsurance premiums paid overseas would inevitably add pressure on the balance of payments.
Supporters of the reform, however, argue that a competitive reinsurance market could strengthen risk management practices, improve service quality and enhance the overall resilience of the insurance sector.
The new trade deal commits Dhaka to removing this mandatory cession requirement, including for US insurers, opening the market to full competition
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Bangladesh will have to expand imports of defence equipment from the United States under a newly signed bilateral trade agreement, while limiting military procurement from certain other countries.
The agreement, signed on 9 February, reduces Bangladesh's reciprocal tariff rate with the US to 19%. In return, Bangladesh will benefit from zero reciprocal tariffs on readymade garments exported to the US that are produced using American cotton and man-made fibre, according to the agreement.
The agreement
published by the Office of the United States Trade Representative (USTR) states: "Bangladesh shall endeavor to increase purchases of US military equipment and limit military equipment purchases from certain countries."
While the publicly released version of the agreement does not specify which countries will be affected by the reduction in military procurement, a draft version provided by the US had included a provision calling for a decrease in defence equipment imports from China.
Beyond defence procurement, the agreement outlines several long-term trade commitments. Over the next 15 years, Bangladesh is set to import more than $15 billion worth of liquefied natural gas (LNG) from the US.
Bangladesh will also increase imports of American automobiles and auto parts.
In the aviation sector, Bangladesh has agreed to purchase 14 Boeing civil aircraft along with related parts, with provisions indicating the possibility of additional aircraft acquisitions in the future.
Also, Bangladesh shall submit a full and complete notification to the World Trade Organization (WTO) of all subsidies that it provides, within six months of entry into force of this agreement.
Beyond defence procurement, the agreement outlines several long-term trade commitments.
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Experts have warned that Bangladesh's newly signed reciprocal tariff agreement with the United States sharply limits its ability to enter trade deals with countries such as China or Russia.
They said the pact includes a clause barring Bangladesh from concluding agreements with any "non-market economy", with violations risking the reimposition of a 37% reciprocal tariff first imposed by Washington in April last year.
The agreement states: "If Bangladesh enters into a new bilateral free trade agreement or preferential economic agreement with a non-market country that undermines this Agreement, the United States may, if consultations fail, terminate this Agreement and reimpose the applicable reciprocal tariff rate."
The US-classified non-market economies include China, Russia, Vietnam, Belarus, Tajikistan, Uzbekistan, Moldova and Azerbaijan.
Trade analysts said the clause could also block Bangladesh's entry into the world's largest trade bloc, the Regional Comprehensive Economic Partnership, as China is a member and accession would require separate agreements with all members.
They added that Bangladesh's current trajectory of engagement with China may no longer be viable.
Former WTO Cell director Md Hafizur Rahman and former Bangladesh Trade and Tariff Commission member Mostafa Abid Khan shared these views with TBS while analysing the agreement.
Commerce Adviser Sk Bashir Uddin and US Trade Representative Jamieson Greer signed the deal in Washington on 9 February. Under the pact, the reciprocal tariff on Bangladeshi exports has been lowered to 19%, while garments made from US cotton and synthetic fibres will qualify for zero reciprocal duty.
However, much of the 32-page text released by the Office of the US Trade Representative sets out obligations Bangladesh must meet to access limited tariff relief, they said.
A close reading shows that while most US tariffs remain intact, Bangladesh has agreed to eliminate or sharply reduce customs duties on most US product categories. Some goods will receive duty-free access immediately, while others will see tariffs halved and fully phased out within five to ten years.
"….customs duties on originating goods provided for in the items in staging category EIF shall be eliminated entirely, and these goods shall be duty-free on the date of entry into force of this Agreement…customs duties on originating goods provided for in the items in staging category A shall remain zero," reads the document, without specifying items under those categories.
The agreement is expected to take effect 60 days after both sides complete their legal procedures.
Potential impact on investment
The agreement allows the US to take action against companies operating in Bangladesh if they export goods to the US at below-market prices. It also permits action if a foreign firm exports to third countries at below-market rates and a US company claims injury as a result.
Hafizur said this could deter investors, particularly from China and other countries, who view Bangladesh as a low-cost production base for exports to the US.
Asked how "market rate" would be defined, Abid said the US would determine it, recalling that past anti-dumping cases used production costs plus a 20% profit margin.
Revenue collection, intellectual property
The agreement is expected to boost Bangladesh's garment exports by granting zero reciprocal tariffs on apparel made from US cotton. India and Pakistan, which rely on domestic cotton, will not receive similar benefits, potentially giving Bangladesh an edge.
The US will offer tariff concessions on 6,710 products, while Bangladesh will benefit on 1,638 items.
Hafizur said the US has cut duties on its exports by 50%, leaving only VAT and advance income tax, which could reduce Bangladesh's revenue and weaken protection for domestic industries.
On intellectual property, Bangladesh must accede to 13 treaties outside the WTO framework, a process both experts said would pose significant legal and economic challenges.
Regulatory and labour obligations
Bangladesh has agreed to remove non-tariff barriers, licensing requirements and restrictions on US products, accept US certifications unilaterally, and comply with safety and emissions standards set by agencies such as the FDA.
It must also ease barriers for reinsurers, expand freedom of association for workers, resolve criminal cases against factory workers, establish a minimum wage review mechanism, and strengthen IP enforcement.
Bangladesh will also have to ratify or accede to a dozen global conventions, including the Berne Convention, within three to five years.
Commercial purchases for Bangladesh
Commercial purchase deals under the agreement include Bangladesh's acquisition of 14 Boeing aircraft, with an option to buy more, a long-term offtake of US liquefied natural gas valued at an estimated $15 billion over 15 years, procurement of at least 700,000 tonnes of wheat per year for five years, 2.6 million tonnes or $1.25 billion worth of soy and soy products over one year, and cotton worth $3.5 billion.
Regarding the Boeing aircraft, Commerce Adviser Sk Bashir Uddin told journalists that Bangladesh would spend between TK30,000 and 35,000 crore to purchase them, payable over 20 years, averaging roughly Tk1,500 crore per year.
Security clauses
While protecting US business, Bangladesh must take precautions in trades with countries that face US economic or national security concerns.
The agreement states: "Bangladesh shall adopt or maintain a complementary restrictive measure, in accordance with its laws and regulations, in support of the US measure" if the US imposes a "border measure or other trade action" to protect its economic or national security.
The deal restricts Bangladesh's defence purchases. "Bangladesh shall endeavour to increase purchases of US military equipment and limit military equipment purchases from certain countries."
It also dictates which countries Bangladesh should do business with: "Bangladesh shall adopt measures to encourage shipbuilding and shipping by market economy countries."
Facilitating US investment
The deal also facilitates US direct investment in exploration and mining of critical minerals and energy resources in Bangladesh, as well as in power generation, telecommunications, transportation, and infrastructure, on terms no less favourable than those offered to local investors.
The agreement requires Bangladesh to stop subsidising state-owned enterprises producing commercial goods that may discriminate against US goods and services.
Bangladesh agrees to do all these to get some tariff relief in exchange for helping the US minimize its trade gap – roughly $6.1 billion in 2024 – with Bangladesh.
Limited tariff benefits
In return, the US has pledged to create a mechanism allowing a limited volume of Bangladeshi apparel and textile exports to enter duty-free, linked to the use of US cotton and man-made fibres.
Other Bangladeshi goods will face an additional ad valorem duty capped at 19%.
The White House said the agreement builds on the 2013 Trade and Investment Cooperation Forum Agreement and would provide "unprecedented access" to each other's markets.
USTR Jamieson Greer said the deal marked "a meaningful step forward" in opening markets and creating new opportunities for American exporters.
Highlights:
- 7,132 US products to get duty-free access in Bangladesh
- 2,500 Bangladeshi products to receive duty-free access in US market
- Products made with US cotton, man-made fiber inputs to get US duty-free access
- 4,922 US products became duty-free in Bangladesh on the day of signing
- Bangladesh will shift sourcing of certain imports to US
- Bangladesh will purchase Boeing aircraft, LNG, LPG, soybeans, wheat, cotton, and military equipment from US
Under a recent reciprocal trade deal signed with US, Bangladesh will grant duty-free access to 7,132 American products, while 2,500 Bangladeshi products will get the same privilege into the world's largest economy.
Chief Adviser Muhammad Yunus disclosed the details in a Facebook post today (15 February), saying that Bangladesh's duty-free list includes a wide range of items such as pharmaceuticals, agricultural goods, plastics, timber, and wood-based products. Bangladesh has a total of 7,458 tariff lines.
Under the agreement, all but 326 US products will enjoy duty-free treatment. Prior to the signing of the agreement on 9 February, only 441 US products received duty-free access in Bangladesh.
Of the 7,132 US products, Bangladesh made 4,922 tariff lines effective immediately on the day of signing. The remaining items will see a phased reduction in tariffs.
For 1,538 products, tariffs will be reduced to zero over five years. In the first year, duties will be cut by 50%, with the remaining 50% reduced proportionately over the following four years.
Another 672 products will see tariffs phased out over ten years, with an initial 50% reduction in the first year and the rest gradually eliminated over the subsequent nine years.
The chief adviser said that Bangladesh has committed to purchasing certain products from the US that it already imports from other countries. As the US remains the main destination for Bangladesh's RMG exports, the shift in sourcing is aimed at preserving market access without incurring additional costs.
He emphasised that the move involves changing the source of imports rather than increasing overall spending.
According to Yunus, US has signed reciprocal tariff agreements with around 15 countries, including Malaysia, UK, Switzerland, and Bangladesh. Among the publicly available agreements, Bangladesh's "Agreement on BD-US Reciprocal Trade (ART)" shares certain similarities with deals signed with Malaysia and Cambodia.
However, Bangladesh has secured some comparatively favourable terms. For example, in agreements with Malaysia and Cambodia, those countries must consult the US before signing any digital trade agreement with a third party. No such provision exists in the finalised draft of the Bangladesh-US ART.
The chief adviser, however, did not mention any clause restricting Bangladesh from entering trade agreements with non-market economies such as China or Russia.
On rules of origin, Yunus noted that the agreement text does not specify a fixed threshold for foreign or domestic value addition. This flexibility is expected to make it easier for Bangladeshi exports to qualify for duty-free benefits.
The deal also creates opportunities for products manufactured using US-origin cotton and man-made fiber textile inputs to receive duty-free market access in the US.
Key areas covered under the ART include support for paperless trade, intellectual property rights enforcement, a permanent moratorium on customs duties on e-commerce transmissions, reduction of non-tariff barriers and technical barriers to trade, trade facilitation, conformity assessment certification, good governance measures, and procurement of nuclear reactors, fuel rods, or enriched uranium. Bangladesh has also agreed in principle to accede to nine international IPR-related conventions.
The agreement endorses a permanent moratorium on e-commerce duties and allows the import of US medical devices and pharmaceuticals without prior market authorisation, provided they carry certification from the US Food and Drug Administration.
It also commits Bangladesh not to impose restrictions on remanufactured goods and to recognise US sanitary and phytosanitary measures for food and agricultural imports. US certification will be accepted for dairy, meat, and poultry products.
Provisions also include completing agricultural biotechnology registration processes within specified timelines and recognising related food and agricultural products, provided they do not contain living modified organisms.
Bangladesh will follow international standards for live poultry imports, recognise maximum residue limits, and complete market access procedures for plant and plant products within 24 months.
The deal further calls for liberalising equity caps for US investment in insurance, oil, gas, and telecommunications sectors; enforcing anti-corruption regulations; accepting the WTO Agreement on Fisheries Subsidies; refraining from subsidies linked to Illegal, Unreported and Unregulated fishing; and updating Bangladesh's labor laws in line with international labor standards.
In digital trade and technology, the agreement recognises frameworks such as Cross-Border Privacy Rules, Privacy Recognition for Processors, and Personal Data Protection Office standards.
It also includes commitments to safeguard US economic and national security interests and to explore increased imports from the US, including Boeing aircraft, LNG, LPG, soybeans, wheat, cotton, and military equipment.
"Overall, the Agreement on BD-US Reciprocal Trade will help Bangladesh maintain competitiveness in the US market, expand trade globally, attract investment, and deliver economic benefits," Yunus said.
All but 326 US products will enjoy duty-free treatment
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Bangladesh will review its reciprocal trade deal with the United States (US) after the Supreme Court of the US struck down many of the Trump administration’s sweeping and often arbitrary duties, said a senior Commerce Ministry official today.
Following the court’s decision, the
US President announced a 10 percent additional tariff on all countries. If finalised, Bangladesh will face a 26.5 percent tariff in addition to the existing 16.5 percent.
“First we will analyse the deal, and then we will take a decision,” Khadija Nazneen, additional secretary of the WTO wing of the Commerce Ministry, said in response to The Daily Star.
She said the agreement signed by Bangladesh with the US contains an exit clause.
“Only in the case of Bangladesh is there an exit clause in the deal. No other country with which the US has signed a tariff deal has such a clause. So, we will decide as per government policy,” said Nazneen, who led the Bangladesh delegation that signed the deal in Washington on February 9.
She did not elaborate on the implications of the Supreme Court’s ruling for Bangladesh’s trade with the US.
Another senior Commerce Ministry official, requesting anonymity, said the ruling scrapped the entire deal, meaning it may no longer be applicable to Bangladesh.
“However, we will discuss it in detail soon to take the necessary actions. There is a possibility of cancellation of the deal signed with Bangladesh, as the whole agreement has been struck down,” the official said.
Bangladesh was among a few countries that signed the American Reciprocal Trade (ART) deal with the US on February 9, securing a reduction in the reciprocal tariff rate to 19 percent from 20 percent.
The US is Bangladesh’s single largest export destination. The interim government signed the deal with the Trump administration to secure market access, though it drew criticism for being one-sided.
Trump declared reciprocal tariffs as part of a national emergency on April 2 last year. Initially, a 37 percent tariff was announced for Bangladesh, later reduced to 35 percent. After negotiations, it was brought down to 20 percent and subsequently to 19 percent following the deal.
The 19 percent reciprocal tariff was in addition to the existing 16.5 percent duty, taking the total effective average tariff to 34.5 percent. If the proposed 10 percent additional tariff is implemented, the tariff rate would stand at 26.5 percent.
Faisal Samad, a director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said it was too early to comment.
“It is a legal matter. We need a few working days to understand the clear picture before making any comment,” he said.
He added that exporters are hopeful that if the 10 percent rate is fixed and the total effective tariff stands at 26.5 percent, Bangladesh may benefit.
Following the court’s decision, the US President announced a 10 percent additional tariff on all countries
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