Bangladesh’s Textile Industry: Maintaining Competitiveness Despite U.S. 35% Tariff

The United States’ decision to maintain a 35% tariff on Bangladeshi garment exports, effective August 1, 2025, with no reduction secured in negotiations between U.S. officials and Bangladesh’s interim government, poses a significant challenge to the nation’s textile industry. This sector, accounting for 80% of Bangladesh’s export earnings and employing over 4 million people, faces increased costs in its largest single market. Despite this trade barrier, Bangladesh retains structural and strategic advantages, including unmatched mass production capabilities, low production costs, and robust supply chains, enabling it to compete with rivals like India, Vietnam, and Pakistan. This article explores how Bangladesh sustains its edge in the global textile market, supported by key facts and figures.

Unrivalled Mass Production Capabilities

Bangladesh’s textile industry excels in mass production, particularly for basic and mid-range apparel. With over 4,500 garment factories, the country recorded $50 billion in textile exports by December 2024, an 8.3% increase from the previous year, according to the Export Promotion Bureau (EPB). From January to April 2025, garment exports to the U.S. surged by 29% year-on-year to $2.98 billion, showcasing resilience despite global pressures. Between 2020 and 2024, U.S.-bound exports grew by 40.45%, from $5.22 billion to $7.34 billion, cementing Bangladesh’s status as a top-10 apparel exporter to the U.S.

This production scale surpasses most competitors. India, with $16.36 billion in garment exports in 2024, holds a 2.94% share of global apparel trade, compared to Bangladesh’s 6.90% share and $38.48 billion in exports. Vietnam and Pakistan lack the immediate capacity to absorb large-scale U.S. orders. MA Jabbar, managing director of DBL Group, stated, “Vietnam and other competitors currently lack the capacity to absorb large volumes of orders,” providing Bangladesh a competitive buffer. Its 4 million-strong workforce, efficient port operations, and extensive textile mill network enable rapid production of high-volume, low-cost apparel, such as T-shirts and jeans, demanded by U.S. retailers like Walmart, Levi Strauss, and VF Corp.

Cost Advantage Despite Tariff Hikes

Bangladesh’s low production costs remain a key competitive factor. The country’s minimum monthly wage for garment workers is approximately $115, among the lowest globally. This enables manufacturers to produce items like a $5 T-shirt, which, even with the 35% tariff, results in a U.S. retail price of $30–$35, still profitable for American retailers. For example, a $10 polo shirt, previously subject to a 16% duty ($11.16 landed cost), now costs around $15.10 with the tariff—a 51% increase but competitive compared to higher-cost producers like South Korea, Japan, or Turkey. India, despite a lower 26% tariff, faces higher production costs, limiting its ability to match Bangladesh’s pricing for basic apparel.

Economies of scale further mitigate the tariff’s impact. Bangladesh’s vertical integration, with local textile mills supplying 70% of knitwear fabric and 40% of woven fabric needs, reduces reliance on imports, lowering costs and shielding manufacturers from global supply chain disruptions. Unlike Pakistan, which depends heavily on imported cotton, Bangladesh’s self-sufficiency strengthens its cost advantage. ABM Shamsuddin of Hannan Group noted that existing production capacity helps absorb short-term losses, as U.S. buyers prioritize cost over tariff-driven price increases.

Established Supply Chains and Buyer Relationships

Bangladesh’s long-standing relationships with U.S. retailers provide a competitive edge. Companies like Gap, Fruit of the Loom, and Levi Strauss rely on Bangladesh for consistent quality and timely delivery. In 2024, the U.S. imported $8.36 billion in goods from Bangladesh, primarily garments, underscoring market dependence. Unlike India or Vietnam, which are scaling up capacity, Bangladesh’s infrastructure—modern factories, efficient logistics, and streamlined port operations—ensures reliable delivery. The Port of Chittagong, handling 90% of Bangladesh’s trade, reduced turnaround times by 20% since 2023.

Compliance with international labor and environmental standards, including green manufacturing practices adopted since 2016, appeals to Western brands facing sustainability pressures. Certifications like ISO and WRAP (Worldwide Responsible Accredited Production) give Bangladesh an edge over smaller competitors like Sri Lanka or Cambodia, which face higher tariffs (44% and 49%, respectively).

Strategic Adaptations to Mitigate Tariff Impact

With negotiations between Bangladesh’s interim government and U.S. officials failing to reduce the 35% tariff, the country is pivoting to alternative strategies. Efforts to increase U.S. cotton imports to narrow the $6.15 billion trade deficit (2024: $8.36 billion exports vs. $2.21 billion imports) continue, though no tariff relief has been secured. The 90-day tariff suspension in April 2025 offered temporary relief, but the industry now faces the full tariff burden.

Bangladesh is diversifying its export markets to offset U.S. losses. The EU, absorbing $5.36 billion in apparel exports (50% of total apparel exports), provides duty-free access under the Everything but Arms (EBA) initiative, cushioning the tariff’s impact. Investments in high-value products, such as technical textiles and sustainable fashion, are also increasing. DBL Group reported a 10% rise in eco-friendly apparel orders in 2024, signaling a shift toward premium markets to boost margins.

Social, Economic, and Geopolitical Risks of Losing U.S. Market Share

A significant loss of U.S. market share due to the 35% tariff could have catastrophic consequences for Bangladesh’s economy and society, with ripple effects extending to geopolitical stability in the region. The textile industry, employing over 4 million people—60% of whom are women—serves as a cornerstone of economic and social progress. A decline in U.S. exports, which accounted for $8.36 billion in 2024, could lead to widespread factory closures and layoffs. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) estimates that a 10% drop in U.S. orders could result in 500,000 job losses within a year, exacerbating unemployment and poverty in a country where the industry supports 16 million indirect jobs.

The social impact would be particularly severe for women’s empowerment. The garment sector has been a catalyst for gender equality, providing women with financial independence and social mobility. A contraction in the industry could reverse these gains, pushing women back into informal or vulnerable employment, reducing household incomes, and increasing gender disparities. The World Bank notes that female employment in Bangladesh’s garment sector has reduced poverty rates by 15% in urban areas since 2000, and any setback risks undoing decades of progress.

Economically, the loss of U.S. market share could destabilize Bangladesh’s financial system. The textile industry contributes 13% to the nation’s GDP and 80% of its foreign exchange earnings. A sustained decline in exports could weaken the Bangladeshi taka, increase inflation, and strain government finances, limiting investments in infrastructure and social programs. The International Monetary Fund (IMF) has warned that Bangladesh’s economic stability hinges on export-led growth, and a prolonged tariff burden could push the country toward a balance-of-payments crisis.

Socially and politically, reduced economic opportunities could fuel unrest. Unemployment and poverty are fertile grounds for radical ideologies, including extremist interpretations of Islam, which could gain traction in marginalized communities. Historical data from the South Asia Terrorism Portal indicates that economic downturns in Bangladesh have correlated with spikes in extremist activities, threatening law and order. Political instability could also rise, as public dissatisfaction with economic hardship erodes trust in the interim government, potentially leading to protests or governance challenges.

Geopolitically, the U.S. tariff could strain bilateral relations and shift regional dynamics. The U.S. has strategic interests in Bangladesh, including countering China’s growing influence in South Asia. Bangladesh’s trade deficit with the U.S. ($6.15 billion in 2024) already tilts in America’s favor, and imposing high tariffs risks alienating a key partner. China, which has invested $20 billion in Bangladesh’s infrastructure through the Belt and Road Initiative, could capitalize on strained U.S.-Bangladesh ties to deepen its geopolitical foothold. For instance, China’s offer of tariff-free access to 98% of Bangladeshi goods in 2024 has already boosted exports to $1.2 billion, and further economic reliance on China could shift Bangladesh away from Western alliances. The Diplomat notes that a weakened U.S.-Bangladesh trade relationship could embolden China’s regional dominance, undermining U.S. strategic objectives in the Indo-Pacific.

Challenges and the Path Forward

The sustained 35% tariff risks order cancellations if U.S. buyers prioritize cost over loyalty. Competitors like India, benefiting from a 26% tariff and rising stock prices (e.g., Gokaldas Exports up 8.2% in July 2025), are poised to gain market share. Bangladesh must address infrastructure challenges, such as power and gas supply disruptions, to maintain full-capacity production. Continued investment in automation and skill development is essential to sustain low costs and high output.

In conclusion, Bangladesh’s textile industry remains competitive despite the U.S. 35% tariff due to its mass production capabilities, cost advantages, established supply chains, and strategic market diversification. With $50 billion in annual exports, a 6.9% global market share, and a robust manufacturing ecosystem, Bangladesh is well-equipped to navigate this challenge. By strengthening buyer relationships and expanding into high-value and EU markets, the country can maintain its position as the world’s second-largest garment exporter.

Sources:

• The Daily Star: US 35% Tariff Impact on Bangladesh RMG
• The Business Standard: 35% US tariff to be disastrous for Bangladesh’s exports
• Reuters: Trump tariff shock stings Bangladesh, Sri Lanka garment giants
• The Economic Times: Gokaldas Exports, other textile stocks zoom up to 8%
• Wikipedia: Textile industry in Bangladesh
• VoxDev: US tariffs on Bangladesh threaten economic and social progress
• The Diplomat: Bangladesh Offers to Import More From the US
• Apparel Resources: Trump’s 35% tariff raises alarm over Bangladesh’s $8.4 billion export industry