Bangladesh’s Strategy to Mitigate U.S. Tariffs Through Cotton Imports

Bangladesh plans to import more U.S. cotton to counter potential tariffs from the Trump administration. The trade deficit with the U.S. rose to $6.2 billion in 2024. To further mitigate tariff risks, Bangladesh aims to enhance domestic cotton production and eliminate related tariffs. Vietnam is similarly addressing trade challenges, while Bangladesh must prepare for the implications of graduating from the U.N.’s LDC category.

Bangladesh is set to import increased volumes of cotton from the United States as a strategic maneuver to mitigate potential tariffs associated with the Trump administration’s trade policies. Foreign affairs adviser Md. Touhid Hossain expressed this approach amid President Trump’s consistent efforts to address the U.S. trade deficit with foreign nations.

In 2024, the United States imported $8.4 billion worth of goods from Bangladesh, while the latter exported $2.2 billion to the U.S., resulting in a trade deficit of $6.2 billion, a 2 percent increase from the previous year. President Trump has emphasized that trade surpluses signify the U.S. being unfairly treated by international trade partners.

Currently, Bangladeshi exports are subjected to U.S. tariffs, including a 15.6 percent duty on apparel. Hossain noted that by increasing cotton imports from the U.S. and exporting garments made from this cotton, Bangladesh aims to create a scenario that might deter the U.S. from imposing further tariffs.

Hossain acknowledged the necessity for Bangladesh to enhance its domestic cotton production, which meets only 3 percent of its national demand. He indicated that the interim government plans to classify cotton as an agricultural product and introduce subsidies to encourage its cultivation, potentially within three months. Moreover, he advocated for the elimination of the 4 percent advance income tax on cotton produced domestically by the National Board of Revenue.

Additionally, Vietnam is taking similar steps to counteract potential tariffs resulting from trade deficits. Recently, Vietnamese officials engaged with U.S. Trade Representative Jamieson Greer in Washington, D.C., to discuss ways to enhance economic collaboration, including the removal of trade barriers.

Another challenge for Bangladesh is the impending graduation from the United Nations’ Least Developed Countries (LDC) classification next November. This transition will result in the loss of certain trade benefits from the European Union, which could increase apparel import tariffs from zero to approximately 12 percent by 2029. Hossain is optimistic that the Bangladeshi business community will efficiently prepare for these changes during the subsequent grace period, which allows duty-free access to the EU for three additional years post-graduation.

The potential impact of Bangladesh’s strategy on U.S. cotton farmers remains uncertain. As China has retaliated with a 15 percent tariff on U.S. cotton, farmers are grappling with rising operational costs and declining commodity prices. In response, the U.S. Department of Agriculture has announced that it will deliver up to $10 billion in assistance to agricultural producers through the Emergency Commodity Assistance Program for the 2024 crop year, with eligible upland and extra-long staple cotton farmers set to receive $84.74 per acre in support.

In conclusion, Bangladesh’s initiative to import more cotton from the United States seeks to counteract the possible imposition of additional tariffs while simultaneously looking to bolster its domestic cotton production. This strategy reflects the nation’s proactive stance in navigating trade relations amid changing international policies. Furthermore, with the impending graduation from the LDC category and the potential repercussions of tariffs, Bangladesh must remain vigilant and adaptive in its trade strategies to safeguard its economic interests, while U.S. cotton farmers simultaneously seek relief amid global tariff challenges.

Original Source: sourcingjournal.com