By Emran Emon
In a world where geopolitics and economics intersect in increasingly complex ways, the recent imposition of a 37% tariff on Bangladeshi exports to the United States marks a pivotal moment in global trade dynamics. This decision by the Trump administration could shift the contours of trade relationships in the South Asian region, especially as it plays into the hands of neighboring India, which benefits from a more modest tariff of 27%. The implications of this policy change are far-reaching, not just for Bangladesh, but for the broader strategic and economic landscape, especially given the underlying political currents of the Trump-Modi and Hillary-Yunus relationships.
To understand the impact of the 37% tariff imposed on Bangladesh, it is essential to acknowledge the broader context in which this decision has made. During the Trump administration, trade wars became a central tool in reshaping global trade. With a “America First” rhetoric, President Trump has often pushed for policies that benefit US manufacturing while penalizing countries with favorable trade balances with the US.
In the case of Bangladesh, the new tariff serves multiple purposes. First, it creates a protectionist environment that seeks to safeguard American industries, especially textiles, which are in direct competition with Bangladeshi exports. Second, the tariff serves as a bargaining chip in future trade negotiations, compelling Bangladesh to make concessions on various economic or political fronts, such as opening up its markets further or aligning more closely with US foreign policy objectives.
Bangladesh, as one of the world’s largest exporters of ready-made garments (RMG), has long relied on the Generalized System of Preferences (GSP), which allowed duty-free access to US markets. The US withdrawal of this preferential treatment in 2019 already marked a major shift, but the recent increase in tariffs represents a severe blow to a country that depends heavily on textile exports for its economic survival. With over 80% of Bangladesh’s export earnings coming from the garment industry, the imposition of a tariff at such a high rate will cause a ripple effect on not only the economy of Bangladesh but also its employment rate, particularly in the garment sector.
While Bangladesh grapples with the consequences of these new tariffs, its neighbor India stands poised to benefit. The 27% tariff on Indian exports to the US places India in a more advantageous position, particularly in comparison to Bangladesh.
India’s export profile, while not as concentrated in textiles as Bangladesh’s, includes a broad range of products, from machinery to chemicals and pharmaceutical goods. The 27% tariff is less damaging than Bangladesh’s 37% tariff, and India’s more diversified export base means that its dependence on the textile sector is less pronounced. Indian textile manufacturers, in particular, could exploit this situation by offering more competitive prices in the US market, thus gaining an edge over Bangladesh’s textile exports.
Moreover, India’s economic growth trajectory is already benefiting from a burgeoning middle class, expanding consumer market, and strong infrastructure investments. With trade restrictions tightening for its neighbors, India may see increased demand for its products, both in the US and globally.
Moreover, India’s focus on making itself a manufacturing hub through initiatives like “Make in India” could accelerate its advantage in industries previously dominated by Bangladesh, such as textiles. India’s relatively stronger economic ties with the United States, coupled with a more favorable tariff, will likely give it a competitive advantage in trade negotiations and could open the door to greater economic influence in South Asia.
The shifting trade dynamics between the United States and South Asia cannot be fully understood without considering the evolving diplomatic relationship between President Donald Trump and Indian Prime Minister Narendra Modi.
Over the past few years, the US-India relationship has become increasingly aligned, especially in terms of strategic and defense cooperation. Modi’s government has leveraged this relationship to push for greater economic ties with the US, including trade deals and investments in key sectors such as defense and technology.
While Trump’s trade policies have at times alienated traditional allies, India has generally been a beneficiary of these policies. Trump has repeatedly expressed admiration for Modi’s leadership and has sought to forge closer ties with India, positioning it as a counterbalance to China’s growing influence in the Indo-Pacific region. The Trump-Modi relationship, therefore, has a significant impact on trade, with India benefiting from a more favorable tariff rate and a broader diplomatic and economic relationship with the United States.
This partnership is crucial for Modi, as it enhances his government’s geopolitical standing and opens up opportunities for India to secure technology and defense deals with the US. Moreover, India’s role as a key partner in the United States strategy to counter China has bolstered the Indian economy and solidified its position in the US trade agenda. In this context, the lower tariff for India can be seen as part of the broader strategic calculus that the Trump administration has embraced, where trade policy is intertwined with foreign policy objectives.
However, the story of US-Bangladesh trade relations cannot be entirely divorced from the broader political context, particularly the connections between former US Secretary of State Hillary Clinton and Nobel laureate Dr. Muhammad Yunus. Dr. Yunus, who played a significant role in popularizing microfinance and poverty alleviation globally, had a complicated relationship with recent ousted fascist Awami political party. But he has often found a supportive ally in Hillary Clinton.
Clinton has long been an advocate for social entrepreneurship and economic development, particularly in developing nations. Her connection with Dr. Yunus is rooted in shared values of economic empowerment and poverty reduction, themes that have been central to her political career. While Clinton’s influence on US trade policy has been more nuanced, her personal connection with Yunus and the focus on global development could play a role in shaping US-Bangladesh relations, especially in areas that extend beyond tariffs and trade.
In the context of the Trump-Modi dynamic, however, the Hillary-Yunus relationship could be seen as an alternative avenue for promoting global development through non-traditional trade policies. While Trump’s tariffs are rooted in a more transactional approach, the Hillary-Yunus alliance underscores a different form of engagement, one focused on fostering long-term development through grassroots initiatives and inclusive economic growth.
However, the Trump administration’s decision to impose higher tariffs on Bangladesh than on India may also stem from the political undertones of the Hillary-Yunus relationship—especially given that Dr. Yunus now serves as the Chief Adviser to the interim government of Bangladesh and is effectively leading the country at this critical juncture.
The imposition of higher tariffs on Bangladeshi exports to the United States will undoubtedly affect the country’s economy, but it also serves as a broader lesson in the complex and often unpredictable nature of global trade. For Bangladesh, this situation represents an urgent call for diversification of its export markets and industries. To mitigate the impact of US tariffs, Bangladesh must look toward strengthening trade relations with the European Union, China, and other emerging markets, while also investing in sectors beyond textiles.
For India, the tariff situation provides both opportunities and challenges. While India stands to benefit from the shift in trade dynamics, it must be cautious of the risks posed by a protectionist global environment. India’s leadership in global trade will be tested as it navigates the complexities of US-China tensions, regional security issues, and its own economic challenges.
Ultimately, the Trump-Modi relationship and the Hillary-Yunus connection highlight the intersection of trade policy and geopolitics. As the South Asian region continues to evolve, it will be crucial for Bangladesh, India, and their global partners to adapt to the shifting tides of international trade, balancing economic interests with diplomatic strategies in an increasingly multipolar world.
Overall, the trade war sparked by Trump’s tariffs may offer a temporary advantage to India, but it also serves as a reminder of the importance of strategic alliances, diversification, and resilience in the face of evolving global trade challenges.
Emran Emon is a researcher, journalist, and columnist. He can be reached at emoncolumnist@gmail.com