Bangladesh in a Catch-22 Situation

Bangladesh is in a catch-22 situation as Brussels urges Dhaka to reduce tariffs on European Union (EU) products, following Dhaka’s offer to Washington to reduce tariffs on products from the USA.

US President Donald Trump has announced fresh tariffs and rate hikes on a range of products from more than 100 countries, with Bangladeshi exports facing a 37 percent duty upon entry.

The US tariff rate on Bangladeshi products was previously an average of 15 percent, meaning the rate has more than doubled.

In view of the situation, Commerce Adviser Sk Bashir Uddin said that Bangladesh would take steps to narrow the trade gap with the US by increasing imports and removing non-tariff barriers.

The US is the largest market for Bangladeshi readymade garments. Bangladesh exported about $8.4 billion worth of goods to America in 2024, of which $7.34 billion were readymade garments.

However, the USA later halted the tariff on Bangladeshi goods for the next three months.

He also said that Bangladesh plans to increase imports of essential goods from the USA and reduce its trade surplus with the country to negotiate the recently announced 37% "reciprocal" tariff, set to take effect on 9 April, Commerce Adviser Sk Bashir Uddin said.

"We, especially our chief adviser, will soon contact the appropriate US authorities," he told journalists after an emergency meeting with Chief Adviser Professor Muhammad Yunus recently.

Khalilur Rahman, the chief adviser’s high representative, said that Bangladesh was among the first nations to unilaterally approach relevant US authorities, including the USTR, to explore ways to enhance bilateral trade.

"When I visited Washington in February, they told me, 'You're the first to approach us,'" Rahman said, highlighting the interim government's proactive engagement following the Trump administration's inauguration and its initiatives to facilitate trade with the country's single largest export market.

According to Xinhua, Bangladesh's trade deficit in the first five months of the 2024–25 fiscal year (July 2024–June 2025) dipped to nearly 8 billion U.S. dollars, according to the latest data from the Bangladesh Bank.

The central bank's data revealed that the country's import payments were 26.01 billion dollars, down 1.2 percent in the July–November period, while earnings from exports stood at 18.13 billion dollars, up 10.1 percent during the same period.

The data showed that the gap between export earnings and import payments in the same period of the previous fiscal year (July 2023–June 2024) was 9.86 billion dollars.

Officials from the Bangladesh Bank said strong remittances from millions of Bangladeshis living and working abroad helped offset the impact of the deficit.

Bangladesh's trade deficit in the 2023–24 fiscal year was 22.43 billion dollars, according to data from the Bangladesh Bank.

Meanwhile, the European Union Chamber of Commerce in Bangladesh (EuroCham) urged the interim government to avoid discrimination against European Union (EU) companies, as Bangladesh considers offering substantial trade concessions to the United States, said Nuria Lopez, Chairperson of EuroCham Bangladesh.

The EU is Bangladesh’s largest and most reliable trading partner, accounting for half of all exports, with longstanding duty-free and quota-free preferential access granted to Bangladesh under the Everything but Arms scheme since 2001, said Nuria Lopez.

Nuria Lopez, former president of the Spain–Bangladesh Chamber of Commerce and Industry, also said that Bangladesh enjoys a notably higher trade surplus with the EU compared to its other trade partners. Out of a total €22 billion trade in 2024, EU exports accounted for only €2 billion, resulting in a trade balance strongly in favour of Bangladesh. High tariffs and non-tariff barriers hinder EU companies’ efforts to do business with and export to Bangladesh.

EuroCham encourages the government to reaffirm its commitment to a rules-based trading system and to pursue essential trade policy and customs reforms, while ensuring fair and equitable treatment for all trading partners, said Nuria Lopez.

EuroCham stands ready to collaborate with the government in addressing current challenges and to support a smooth and sustainable transition in the post-LDC graduation phase.

Meanwhile, the Bangladesh Investment Summit-2025, organised by the Bangladesh Investment Development Authority (BIDA) recently, primarily gave a positive branding of Bangladesh as an investment destination to entrepreneurs and investors from overseas.

So said Nuria Lopez, Chairperson of the European Union Chamber of Commerce in Bangladesh (EuroCham), which was officially launched on 3 December 2024 at the Hotel Radisson in Dhaka.

EuroCham is a business initiative that is actively supported by the European Union Delegation and the EU Member States in Bangladesh. The Chamber will serve as a centre of excellence, promoting business relations between European investors and their counterparts in the country.

Nuria Lopez, a Spanish citizen and Managing Director of Zalo Knitting Ltd, a leading entrepreneur in the export-oriented readymade garment industry, has been living in Bangladesh since the early '90s.

The presentation of the Bangladesh Investment Summit-2025 was different this year compared to summits held in previous years, said Nuria Lopez.

However, the law and order situation, transparent bureaucracy, timely execution of orders at the grassroots level, uninterrupted power generation, continuation of investment policy, and repatriation of profits must also be ensured, said Nuria Lopez.

BIDA Executive Chairman Chowdhury Ashik Mahmud Bin Harun presented the business and investment potential of Bangladesh.

Chowdhury Ashik Mahmud is working to turn BIDA into an energetic and robust organisation with a vision to woo foreign direct investment (FDI), said Nuria Lopez.

The Spanish entrepreneur also said that Pran-RFL Group, in collaboration with H&M Group and the International Finance Corporation (IFC), has announced plans to generate solar power for use in the apparel sector, marking a significant step towards promoting sustainability within the country's vital RMG industry.

The clean electricity will be purchased by Bangladeshi garment suppliers serving the globally renowned Swedish brand Hennes & Mauritz AB (H&M).

The MoU sets the stage for piloting Bangladesh's first Corporate Power Purchase Agreement (CPPA). Supported by the IFC and led by Pran-RFL Group, this project will link several of H&M's selected suppliers to a newly developed solar park.

Óscar García Maceiras, CEO of Inditex, signed a deal with Pran Group to set up a power plant that will help ease the power crisis in the country.

Bangladesh’s economy will be in deep crisis unless a congenial environment and uninterrupted production are ensured in the export–oriented garment industry, the country’s largest earner of foreign exchange, said Nuria Lopez, also former president of the Spain–Bangladesh Chamber of Commerce and Industry.

Corruption, nepotism, mismanagement, and plundering of state wealth plagued the economy of Bangladesh over the last several years, which will be reversed under the prudent leadership of Bangladesh's interim government led by Nobel Peace Laureate Professor Dr. Muhammad Yunus, said Nuria Lopez.

Nuria Lopez, who came to Bangladesh in the early '90s and set up an export–oriented garment industry in Gazipur, said the readymade garment (RMG) industry is the backbone of the economy, generating about 4 million direct jobs and approximately 15 million jobs indirectly.

According to The Business Standard, Bangladesh received its lowest net foreign direct investment (FDI) inflow in the past five years in 2024, amid political turmoil and economic instability.

A sluggish inflow in the first half of the year, compounded by a mass uprising, the subsequent departure of the Awami League government in August, and a volatile forex situation throughout the year, contributed to a 13.25% year-on-year decrease in net FDI in 2024.

According to central bank data, net FDI inflow amounted to $1.27 billion in 2024, significantly down from $1.46 billion a year ago.

When asked why FDI declined in 2024, Mohammad Ali, Managing Director and Chief Executive Officer of Pubali Bank, told TBS that foreign investors lacked confidence amid the deteriorating law and order situation following the political changeover.

He said, "We did not receive much foreign investment during the first six months of 2024. Then in July, following student-led mass protests, the government was overthrown in August and a new interim government took office.

"During that period, the country's law and order situation deteriorated, although conditions began to improve after December. Foreign investors generally lack confidence in such situations, which is the main reason why FDI in 2024 was lower compared to previous years."

Meanwhile, the interim government has a major task to ensure a sound law and order situation, as the previous Awami League government transformed the country’s law enforcement agencies into ‘monsters’ over the last 15 years.

The Bangladesh economy will suffer heavily if the export-oriented garment industry, the largest earner of foreign exchange, continues to be targeted by miscreants, said Nuria Lopez.

About 4 million workers are employed in the sector, and job creation will be challenging unless a conducive and sustainable environment is ensured in the RMG sector, she said.

Meanwhile, the Spanish entrepreneur has expressed her support for Bangladesh's interim government led by Nobel Peace Laureate Professor Dr. Muhammad Yunus.

The interim government should ensure law and order and protect business establishments and entrepreneurs to revive the economy, said leaders of the Japan Chamber of Commerce and Industry (JBCCI), International Chamber of Commerce, Bangladesh (ICCB), Bangladesh Garment Manufacturers and Exporters Association (BGMEA), and Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) while talking to this correspondent.

However, as the country goes through a transition period, smooth engagement and participation of existing import and export houses are also important to keep the economy on track, said Nuria Lopez.

The economy of Bangladesh suffered a massive blow during the student movement on the quota system in government jobs in July 2024, said Nuria Lopez.

Managing Director of Zalo Knitting Ltd, Nuria Lopez said that employment generation in the economy is crucial, as about 2 million youths enter the job market every year. The RMG sector is labour-intensive, and in a highly populated country like Bangladesh, generating enough jobs is essential.

Urging stakeholders to extend cooperation to the Nobel laureate to carry out necessary reforms, she said the economy will require several years to overcome the losses caused by the movement and violence and emphasised restoring normalcy to run business.

High economic disparity, corruption, nepotism, slow employment creation, the Russia–Ukraine war, and the siphoning off of state wealth by some corrupt individuals have created a crisis in the economy, she said.

Meanwhile, the International Monetary Fund (IMF) has praised Bangladesh's efforts, led by the interim government, to overcome economic challenges amid recent turbulence and major floods.

"In response to the challenging circumstances, the authorities' efforts to initiate adjustments, including continued monetary tightening and rationalising non-priority capital spending, are commendable," IMF Mission Chief for Bangladesh Chris Papageorgiou told the media.