Bangladesh is strategising to increase its use of US cotton as an important and much used input in apparel manufacturing, to leverage a new tariff exemption deal with the United States.
This was announced by Mahmud Hasan Khan, President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), at a press briefing at the BGMEA building in Uttara on Saturday.
The briefing was organized by the BGMEA to express gratitude to both the Bangladesh and US governments for their efforts in significantly reducing reciprocal tariffs.
Khan highlighted that the US is Bangladesh’s largest export market, accounting for 20 percent of its total exports, with 75 percent of these products being cotton-based. Under the new executive order on tariffs, a 20 percent additional duty will not be applied to the value of American raw materials if at least 20 percent of them, such as US cotton, are used in the final product.
"Our focus will be to increase US cotton content in clothing so we get more tariff exemption," Khan stated.
He mentioned that while Bangladesh currently imports a small amount of cotton from the US, this is expected to increase significantly to 2 million bales soon as a result of the new tariff deal.
This aligns with the US Department of Agriculture's (USDA) forecast that Bangladesh's cotton imports will rise to 8.2 million bales in the fiscal year 2026.
Khan noted that Bangladesh previously paid a Most Favored Nation (MFN) duty of 16.5 percent on exports to the US. The newly determined 20 percent additional duty brings the total rate to 36.5 percent on certain products, posing a significant challenge for the industry, which is already struggling with rising production costs.
"A 20 percent tariff on Bangladeshi exports will inevitably increase the cost of sourcing from Bangladesh," said BGMEA President. But would that be large enough to eat into the margins they enjoy, the cost advantage they are able to offer, thanks to the cheapest labour in the world today.
He emphasized that Bangladesh cannot afford to be complacent, as ongoing trade negotiations between the US and other countries could further reduce tariffs for their competitors.
He urged the government to continue negotiations with the US to ensure Bangladesh remains competitive.
The BGMEA president stressed the need for collective action to navigate these new challenges. He called on the government to support the industry like- improving the efficiency of institutions like the National Board of Revenue (NBR), making customs policies more industry-friendly, increasing the efficiency of Chittagong Port, ensuring an uninterrupted supply of electricity and gas.
He also urged industry leaders to increase value addition, invest in backward linkages, and diversify markets and products.
"If industry owners, government, educational institutions, labor organizations, and civil society all work together and collectively take the right decisions for the industry, then this tariff can open the door to new possibilities rather than becoming a barrier," Khan concluded.
Members of BGMEA Board and Senior leaders were also present in the press briefing.