US and Bangladesh strike tariff deal with zero duties on some garments

Bangladesh has secured a new trade agreement with the United States that cuts tariffs on its exports to 19 percent and exempts certain textile and garment products from duties entirely. The deal, announced by Bangladesh's interim government chief Muhammad Yunus, represents a substantial reduction from the original 37 percent tariff rate the Trump administration had proposed, and improves on an earlier 20 percent rate agreed in August last year.

The agreement comes after nine months of intense negotiations between Dhaka and Washington, and offers particular relief to Bangladesh's garment manufacturers, who have faced mounting pressure from American tariff policies. Under the terms, textiles and apparel made from US-produced cotton and man-made fibers will face zero reciprocal tariffs when entering American markets.

Background

Bangladesh's ready-made garment sector is the country's economic engine, accounting for more than 80 percent of export earnings and employing around 4 million workers, predominantly women. The industry contributes roughly 10 percent to Bangladesh's gross domestic product.

When the Trump administration introduced reciprocal tariffs earlier in 2025, Bangladesh faced an initial 37 percent rate on its exports. This threatened to devastate the garment industry and prompted urgent negotiations between Dhaka and Washington. By August 2025, Bangladesh had managed to reduce the rate to 20 percent, but policymakers continued pushing for further cuts.

The timing of the agreement is significant. It comes just days before Bangladesh heads to elections on February 12, and follows months of trade tensions between Bangladesh and India, which has traditionally been its largest trading partner. In April 2025, Bangladesh restricted imports of cotton yarn through land ports, a direct response to India's dominant position in the cotton trade.

Key Details

The agreement establishes a mechanism allowing certain textile and apparel goods manufactured with American materials to enter the US market duty-free. The volume of products eligible for this zero-tariff treatment will be determined based on how much Bangladesh imports in textile inputs from the United States, particularly cotton and synthetic fibers.

Beyond textiles, the agreement includes broader commercial commitments. Bangladesh has agreed to purchase approximately $3.5 billion worth of US agricultural products, including wheat, soy, and corn. The country has also committed to buying $15 billion worth of American energy over 15 years.

Commerce Secretary Mahbubur Rahman confirmed that Bangladesh's key export products—ready-made garments made from cotton and synthetic fibers imported from the US—will receive the zero-tariff treatment. The agreement was formally signed in Washington by Bangladesh's Commerce Adviser Sheikh Bashir Uddin and US Trade Representative Jamieson Greer.

Additional Commitments

The deal extends beyond tariffs. Bangladesh has committed to addressing what the US considers non-tariff barriers to trade, including accepting vehicles built to American safety and emissions standards, recognizing FDA certificates for medical devices and pharmaceuticals, and removing restrictions on US remanufactured goods.

The country has also agreed to permit free data transfer across borders and support a permanent moratorium on customs duties for electronic transmissions at the World Trade Organisation. These provisions reflect American concerns about market access and data flows.

Bangladesh's broader engagement with the US includes a recent agreement to purchase 25 Boeing aircraft, estimated to cost between $30,000 and $35,000 crore.

"The United States commits to establish a mechanism that will allow for certain textile and apparel goods from Bangladesh to receive a zero reciprocal tariff rate." – Joint Statement on US-Bangladesh Trade Agreement

What This Means

For Bangladesh, the agreement offers important breathing room for an industry facing international competition and rising tariff pressures. The zero-tariff provision on garments made with American inputs creates a direct incentive for Bangladeshi manufacturers to source more materials from the US rather than from other suppliers like India.

This shift has immediate implications for India, which exported $2.8 billion worth of cotton to Bangladesh in the 2024-2025 financial year. The new arrangement encourages Bangladesh to redirect some of this purchasing toward American suppliers, potentially reducing India's largest export category to its neighbor.

The agreement also reflects a broader pattern of US trade policy under the current administration. India negotiated an 18 percent tariff rate, slightly lower than Bangladesh's 19 percent, after striking its own deal with Washington. Bangladesh's rate is competitive but not preferential compared to other nations.

For American businesses, the agreement opens significant opportunities in Bangladesh's agricultural and energy sectors, while garment manufacturers gain access to a large supply of duty-free imports from one of the world's largest apparel producers.

The commercial commitments—particularly the $15 billion energy purchase over 15 years—represent a substantial shift in Bangladesh's purchasing patterns and reflect the country's desire to deepen economic ties with the United States.

For Bangladesh's garment workers and manufacturers, the deal provides temporary protection against the tariff regime that threatened their livelihoods. However, the zero-tariff treatment is conditional on using American materials, which may increase production costs and limit sourcing flexibility. Industry analysts view the agreement as offering much-needed relief, though the long-term competitiveness of the sector will depend on how effectively manufacturers can adapt to the new requirements.