Chasing the American dream, risking Europe?

The United States is a key destination for Bangladeshi exports, especially readymade garments, accounting for one-fifth of total apparel shipments. On April 2 last year, our largest single market was jolted by the reciprocal tariff announced by Donald Trump. In the first six months of the fiscal year 2025-2026, exports recorded negative growth in every month except July. After expanding by 12.84 percent in FY 2024-2025, growth fell to minus 2.19 percent in the first half of FY26. December alone saw a sharp drop of 14.25 percent. The slide continued, with exports down 0.50 percent in January 2026 and 12.03 percent in February.

The reciprocal tariff was not the only cause. A larger concern has been political uncertainty at home. Many importers and buyers were waiting for a stable democratic environment, an elected government and a calmer political climate before placing long-term orders. There was some relief on February 9, 2026, when Bangladesh signed an agreement on reciprocal tariffs with the United States. The tariff was reduced from 20 percent to 19 percent. More importantly, garments made from cotton and synthetic fibres imported from the United States will now enjoy zero tariff on entry.

The United States produces some of the finest cotton in the world. Bangladesh also imports from Brazil, Australia, Mali, Benin, Burkina Faso and India. Although US cotton is slightly more expensive, the zero tariff on finished products should raise profitability. As 54 percent of our garment exports are knitwear made from natural cotton, using US cotton can unlock this advantage. We should seize this opportunity. Yet Europe remains our largest market, taking about half of total garment exports. The recent free trade agreement between India and the European Union has raised fresh concerns. The deal spans 27 EU member states, covers about 2 billion people and roughly a quarter of global GDP. Under it, 144 Indian subsectors, including garments, textiles, leather and footwear, will receive duty-free access to the EU.

Bangladesh currently benefits from the EU’s GSP Everything but Arms scheme, which will continue until 2029 even after graduation from least developed country status this November. But we must prepare now for the transition to GSP Plus after 2029. Even before the EU deal, India moved quickly when the United States imposed a 50 percent reciprocal tariff on Indian goods. Indian government officials and textile representatives approached major European buyers such as Inditex, LPP, Aldi, Lidl, Auchan and C and A, offering lower prices. China also stepped up low-cost garment supplies to the EU to offset losses in the US market. As competition intensified, the unit price of Bangladeshi garments in the EU fell by 3.84 percent in 2025.

Export diversification has long been discussed, but progress remains limited. About 70 percent of our garment exports are cotton-based, while nearly 70 percent of global apparel production now relies on man-made fibre and synthetic materials. The zero-tariff facility in the US market offers a chance to expand exports of man-made fibre garments using American raw materials. Beyond Europe and the United States, Bangladesh must deepen its presence in new markets, including the Gulf states, Japan, Korea, Australia, New Zealand and Latin America. The recently signed Bangladesh-Japan Economic Partnership Agreement (EPA) should be fully utilised, as it grants zero duty on 99.9 percent of Bangladeshi products. Despite the challenges, I remain optimistic that Bangladesh can achieve its goal of $100 billion in garment exports.

The writer is deputy managing director of Pubali Bank PLC