Bangladesh plans to import more U.S. cotton to prevent potential tariffs from the Trump administration. In 2024, the bilateral trade showed a $6.2 billion deficit for the U.S. against Bangladesh. Domestic cotton production is also critical, with plans to subsidize local cultivation. Graduation from LDC status poses further tariff challenges, while U.S. farmers face their own uncertainties.
Bangladesh has devised a strategy to mitigate potential tariffs from the United States by increasing its cotton imports from the U.S. Foreign affairs adviser Md. Touhid Hossain emphasized this plan, considering President Trump’s administration’s commitment to address the trade deficit with various countries. In 2024, trade figures indicated that the U.S. imported $8.4 billion in goods from Bangladesh while exporting $2.2 billion, resulting in a trade deficit of $6.2 billion, up by 2 percent from the previous year.
President Trump has often stated that trade surpluses illustrate how America is being unfairly treated on a global scale. Due to existing tariffs, Bangladeshi exports, particularly apparel, already face a hefty 15.6 percent duty. Hossain expressed that by importing U.S. cotton and exporting garments produced from it, Bangladesh aims to create a scenario where the U.S. might reconsider imposing additional tariffs.
Amid this strategy, Hossain acknowledged the need to boost local cotton production, which currently fulfills only 3 percent of national demand despite cotton being a significant cash crop. He mentioned that the interim government intends to recognize cotton as an agricultural product and offer subsidies to enhance its cultivation within three months, while also advocating for the elimination of a 4 percent advance income tax on domestically grown cotton.
Vietnam has similarly been proactive in addressing potential tariffs tied to trade deficits. Recently, U.S. Trade Representative Jamieson Greer engaged with Vietnamese officials to explore mutual economic benefits through reduced trade barriers.
Concurrently, Bangladesh faces the challenge of graduating from the United Nations’ Least Developed Countries (LDC) category in November, which will lead to the loss of favorable trade terms with the European Union. This transition could increase apparel tariffs from zero to approximately 12 percent by 2029. Hossain remains optimistic, noting that businesses will have a three-year grace period post-graduation to prepare for these changes.
The effectiveness of Bangladesh’s cotton import strategy for U.S. farmers is yet to be seen, especially as China has imposed a 15 percent tariff on U.S. cotton as a countermeasure to Trump’s tariffs. Concurrently, U.S. farmers are challenged by rising input costs and decreasing commodity prices. Nonetheless, the U.S. Department of Agriculture is responding by allocating up to $10 billion through the Emergency Commodity Assistance Program for the upcoming 2024 crop year, aiming to support agricultural producers.
Bangladesh is proactively seeking to counter potential U.S. tariffs by increasing cotton imports from America, which it believes will prevent additional duties on its exports. While promoting local cotton production is also on the agenda, the country must navigate challenges tied to its impending graduation from the LDC category, which could lead to increased tariffs from the EU. The overall impact on U.S. cotton farmers amid current trade tensions remains uncertain, but support measures are being enacted to assist them.
Original Source: sourcingjournal.com
