The New U.S. Tariffs and Bangladesh RMG: A Story of Shock, Strategy, and the Next S-Curve

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Share By: Nabil Bin Faruk, Director, Arunima Group and Assistant Professor, Daffodil International University Prologue: A phone call at 3:17 a.m. The call came when the generators had just fallen quiet in Ashulia. “Nabil bhai, can you open your laptop? Our U.S. team is asking for a 6% price cut—immediately.” The buyer’s voice was steady, the message anything but. Between the lines, I could hear it: new tariffs. A policy headline half a world away had become a line-item in our cost sheet, a negotiation on our factory floor, and a worry in the eyes of workers who entrust us with their livelihoods. Since then, like many of you, I’ve been living in spreadsheets and note apps—re-pricing styles, re-phasing yarn bookings, and redesigning our 6‑month capacity map. This article is my field note and research memo rolled into one: a story about what happened, what it means for Bangladesh’s RMG, and what we can do next—practically, fast, and together. Executive Summary (for factory owners & BGMEA leaders)

• What changed in the U.S.: Apparel has always carried heavy import duties, but 2025’s reciprocal tariff regime pushed apparel’s average U.S. import tariff rate notably higher than pre‑2025 levels. Independent analyses show average apparel tariff rates climbed to around 23.8% in May 2025, up from ~14% a year earlier.
• Apparel is a small share of U.S. imports but accounts for a disproportionately high share of duties, underscoring our sector’s sensitivity to tariff shifts.
• Where Bangladesh stands: After months of uncertainty, Bangladesh reportedly negotiated a reduction in the additional reciprocal U.S. tariff on our goods from a proposed 35% to 20%, with BGMEA communicating an effective rate near 36.5% for apparel when you add the legacy MFN average (~16.5%).
• A targeted relief lever: BGMEA has also highlighted a carve‑out: if our exported garment contains ≥20% U.S. raw material (e.g., U.S. cotton), the additional 20% reciprocal duty may not apply—a route to price-rescue on select product lines.
• Market share context: Bangladesh held roughly 9.3% of the U.S. apparel import market in 2024 (about an $80–85 billion market), and several sources argue our relative position could improve versus competitors facing even higher U.S. rates.
• Compliance headwinds remain: U.S. enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) continues to ramp up, with more entities added to the UFLPA Entity List and active detentions requiring deep traceability—especially for cotton.
• E‑commerce disruption cuts both ways: Proposed reforms to the de minimis duty‑free threshold aim to curtail Shein/Temu’s direct‑to‑consumer flows. If finalized, these could nudge volume back into traditional wholesale/retail channels—potentially favorable for Bangladesh’s B2B export model.
• Macro duty environment: Across all products, effective U.S. tariff rates jumped in 2025, indicating broader cost pressure in supply chains and buyer negotiations. Bottom line: This is not an existential collapse; it’s a re‑shuffling. Bangladesh can hold and grow U.S. share—if we respond with surgical costing, U.S.-cotton integration where viable, ironclad compliance, and a push up the value chain.

  1.0 What exactly changed in the U.S.—and why apparel is always in the crosshairs

  Even before 2025, apparel was among the most taxed categories at the U.S. border. Industry analysis shows that while apparel (HS 61/62) accounts for only about 2.5% of U.S. import value, it contributes ~15.6% of total tariff duties—a long‑standing imbalance that magnifies the impact of any new tariff action on our sector. The 2025 reciprocal tariff approach layered fresh duties across many partners and categories. Fashion‑trade research tracking these changes shows the average U.S. apparel tariff rate rising from roughly 13.9% (May 2024) to 23.8% (May 2025) as the new system took hold. This is the backdrop against which buyers came calling for markdowns. At the macro level, 2025 also saw a jump in the effective U.S. tariff rate across all imports (not just apparel), with one model estimating an average rate near 9.14% in June 2025—up from 2.2% in January—illustrating broader inflationary pressure in supply chains and buyer P&Ls.

  2.0 Where Bangladesh stands in this new tariff map

Initial headlines suggesting a 35% reciprocal tariff created shockwaves. Subsequent official and trade‑press updates in Bangladesh indicate the U.S. reduced the additional rate to 20% after negotiations. At a Dhaka press briefing, BGMEA quantified the impact: the effective tariff on our apparel exports to the U.S. now stands around 36.5%, combining the 20% additional reciprocal rate with the legacy average MFN duty (~16.5%) on apparel. That figure has since circulated widely in business reporting and sector analyses. Translation for costing teams: If your buyer’s landed cost model previously assumed ~16–17% duty on your HS codes, their net‑net has shifted up materially—unless mitigated by carve‑outs or re‑engineering. 2.2 A carve‑out worth real money: ≥20% U.S. cotton content BGMEA has underscored a critically important clause: if a product contains at least 20% U.S. raw material—most practically, U.S. cotton—the additional 20% reciprocal duty does not apply to that shipment. The Daily Star likewise reported this “made with U.S. cotton, pay less” logic now embedded in the current regime. For cotton‑heavy Bangladesh (≈75% of our U.S. shipments are cotton‑based, per BGMEA), this is not academic—it’s a pricing lever we can pull on selected programs. What’s needed to use it: reliable U.S. cotton sourcing, certificates of origin, traceability documentation linking bales to fabric to garment, and commercial alignment with buyers who see value in the foregone 20% duty. Sector briefings and buyer–mill discussions on direct U.S.–Bangladesh cotton tie‑ups are already underway. 2.3 Our current market share and signal from the 2024/25 data In 2024, Bangladesh held roughly 9.3% of the U.S. apparel import market, with export value to the U.S. in the $7–8+ billion range depending on the time window and methodology cited. Multiple Bangladesh‑based analyses (drawing on OTEXA data) reported $7.34 billion for 2024 and noted volume growth amid price declines. The Daily Star and other analyses also referenced the 9.3% share, positioning Bangladesh behind Vietnam and ahead of India on value. (For primary data access, OTEXA’s trade portal provides monthly/annual detail by HS line and country.) With China facing steeper U.S. rates on many lines and de minimis scrutiny intensifying on China‑linked DTC pipelines, order diversion to Bangladesh is a plausible medium‑term theme—if we solve the cost and compliance equations discussed below. 3.0 The other elephant in the room: UFLPA and cotton traceability Tariffs are not the only U.S. gating factor. UFLPA enforcement is expanding—in both scope (more entities on the list) and depth (documentation and traceability requirements). DHS announced the largest single expansion of the UFLPA Entity List in January 2025, and CBP continues to publish detention statistics that apparel importers monitor closely. The State Department’s 2025 fact sheet reiterates the law’s “rebuttable presumption” standard—goods linked wholly or partly to Xinjiang or listed entities are presumed inadmissible absent clear and convincing evidence. For Bangladesh factories, two implications are clear:

CBP’s trade advisories and COAC guidance point to continued tightening and maturing of evidentiary expectations—far beyond the old “certificate file” era. 4.0 The de minimis plot twist: When DTC meets duty For several years, ultra‑fast fashion platforms leveraged the U.S. de minimis threshold (≤$800 per parcel) to move vast volumes duty‑free directly to consumers. In late 2024, the White House proposed rules to restrict de minimis eligibility for goods covered by various tariff programs (e.g., Section 301) and to require more data on small parcels. If finalized as proposed, these changes would raise friction for China‑linked DTC apparel and could redirect some consumer demand back to traditional retailer channels—where Bangladesh is strong. Why it matters: When U.S. retailers regain relative price advantage versus DTC parcels, order books for wholesale imports (our wheelhouse) can stabilize or grow—even in a higher‑tariff world. 5.0 Bangladesh’s next playbook—what to do in the next 3, 30, and 300 days 5.1 The 3‑day actions (immediately executable)

• Style-by-style tariff math with buyers. Build a shared landed‑cost tab for each active style highlighting: legacy MFN duty on the HS code, the additional 20%, and the U.S. cotton carve‑out scenario (duty avoided if ≥20% U.S. content). Treat this as evidence in price re‑openers.
• Quick screen of yarn/fabric mills for U.S. cotton feasibility. Cross‑check bale origin documentation and align with mills ready to segregate U.S. cotton batches for targeted programs. Tap existing dialogues noted in sector coverage on U.S.–Bangladesh cotton linkages.
• UFLPA proof pack audit. For your top 10 U.S. buyers, run a documentation gap assessment (invoices, bills of lading, purchase contracts, ginning/spinning records). Use CBP’s public dashboards & guidance to calibrate expectations. 5.2 The 30‑day actions (commercial + compliance)
• Pilot “U.S. cotton lines.” Choose 2–3 cotton‑heavy programs (denim bottoms, chinos, tees) where a U.S.‑cotton blend (≥20%) is mechanically feasible without upsetting hand‑feel or shade standards. Price these lines with the 20% duty waiver modeled in, and pitch to buyers as a tariff‑resilient capsule.
• Re‑mix product portfolio. Shift capacity toward styles where Bangladesh is structurally strong on cost (5‑pocket denim, core chinos, fleece basics) and where the duty waiver can be captured. Use OTEXA trendlines by category to spot growth pockets.
• Strengthen traceability tech. Start with low‑cost digitization (PO–invoice linkage, mill CoOs) and, where buyer‑funded, pilot isotopic/DNA fiber testing for high‑risk lots. Align to the UFLPA “clear and convincing” expectation communicated by U.S. authorities. 5.3 The 300‑day actions (industry‑level)
• BGMEA’s U.S.-cotton corridor. Institutionalize a Bangladesh–U.S. cotton corridor: predictable pricing bands, bale‑level data sharing, and a mutual recognition template for documentation that meets CBP scrutiny—drawing on the public advisories and white papers evolving in 2025.
• Policy guardrails for LDC graduation. Bangladesh’s LDC graduation is slated for 24 November 2026. While the U.S. GSP has lapsed (since Dec 31, 2020) and most textiles/apparel are excluded from GSP anyway, we should coordinate long‑lead, bilateral dialogues on sectoral facilitation (customs cooperation, trusted trader).
• E‑commerce bridge. As de minimis reforms advance, create a BGMEA–retailer working group to channel post‑DTC demand back into wholesale calendars, aligning compliance and speed (near‑shore DCs, cross‑dock models). 6.0 Costing anatomy under the new tariff math Let’s run an illustrative case to ground the conversation you’ll have with buyers:
• Style: Men’s 5‑pocket denim (HS 6203.42)
• FOB (Bangladesh): $7.00
• Legacy duty assumption (avg MFN on apparel): ~16.5% → $1.155 duty on a $7.00 landed value surrogate (illustrative)
• Additional reciprocal duty: +20% → +$1.40 (if computed on FOB‑equivalent base; buyers vary)
• New duty burden vs. legacy: Roughly +$1.40 per piece before freight and margins. Now test the U.S. cotton carve‑out:
• Yarn/fabric engineered with ≥20% U.S. cotton content → additional 20% waived → net duty impact falls back toward legacy MFN territory (still high, but largely where the buyer’s retail pricing model used to be). Negotiation tip: Go in style‑specific. Show buyers two quotes—Standard vs. U.S.‑Cotton—with documentary readiness (affidavits, bale lists) attached. Make them choose with eyes open to compliance and retail price optics. 7.0 Risk radar: three forces to track in H2 2025–2026

8.0 Strategy for BGMEA & policymakers: a compact for the next two years

• Codify a “U.S. Cotton Compliance Standard.” A simple, auditable template—bale origin, ginning, spinning, and fabric conversion proof—vetted with counsel familiar with CBP practice notes and the 2025 COAC white paper’s themes.
• Negotiate for expedited lanes. Pursue trusted trader / CTPAT‑style facilitation conversations focused on apparel traceability and port‑handling predictability, especially as effective tariff rates across the U.S. economy settle at higher planes.
• Prepare for post‑LDC preference shifts. With LDC graduation in Nov 2026 and GSP both lapsed and largely excluding apparel, prioritize bilateral MOUs (customs data exchange, pre‑clearance pilots) over waiting for generic preference revivals. 9.0 A data sketch of the present (selected reference points)
• Average U.S. apparel tariff rate: ~23.8% (May 2025) vs. ~13.9% (May 2024).
• Apparel’s share of U.S. duties: ~15.6% of total U.S. tariff revenue while only ~2.5% of import value (2024).
• Bangladesh’s additional reciprocal tariff (current): 20% (down from 35% proposal per Bangladesh sources).
• Effective tariff on Bangladesh apparel to U.S.: ~36.5% (20% reciprocal + ~16.5% MFN avg) per BGMEA.
• U.S. cotton carve‑out: ≥20% U.S. raw material content may waive the 20% additional duty.
• Bangladesh share of U.S. apparel imports (2024): ~9.3%; U.S. market value cited $80–85B depending on period.
• UFLPA enforcement trend: largest Entity List expansion (Jan 2025) + active detention stats.
• De minimis reform: White House proposals (Sept 2024) to restrict eligibility for tariff‑covered goods; added data requirements for small parcels.
• U.S. effective tariff rate (all imports, 2025): estimated ~9.14% (June), up from 2.2% (Jan). 10.0 Frequently asked by owners Q1. Will buyers absorb the new duties? In 2018–2024, brands often absorbed tariff shocks via margin compression and category repricing. In 2025, with overall tariff pressure higher and DTC competition in flux, buyers are pushing back harder—hence the calls for immediate price cuts. Your best defense: style‑level tariff arithmetic and U.S. cotton options that neutralize the 20% add‑on. Q2. Is U.S. cotton practical at scale? For selected lines, yes. Mills already manage blend segregation for organic/BCI; applying similar controls for U.S.‑origin bales is operationally feasible. The constraint is commercial: bale availability, price basis, and documentation discipline. Sector discussions suggest momentum toward direct Bangladesh–U.S. cotton partnerships—lean in early. Q3. What about LDC graduation—will we lose U.S. preferences? The U.S. GSP has been expired since Dec 31, 2020 and, even when active, most textiles/apparel are excluded as “import‑sensitive.” Our U.S. strategy cannot be preference‑dependent; it must be compliance‑ and value‑engineering‑led. 11.0 The human angle: what this means on the factory floor On the day the new tariffs hit spreadsheets, I walked our sewing lines. The lines didn’t see a policy shift; they saw targets—efficiency, rework, absenteeism, shade variations. Tariffs can’t be controlled, but waste can. That is where a lot of the 6% our buyers ask for actually hides.
• IE blitz sprints: micro‑kaizens, needle‑to‑needle.
• Cut‑plan fidelity: tighter markers, fewer remakes.
• Shade control: fewer off‑lots to re‑cut.
• Right‑first‑time: every % point shows up in the P&L when duties are higher. Tariffs raise the stakes, but the levers remain in our hands. 12.0 Closing: Turning the tariff shock into a Bangladesh advantage When the phone rings at 3 a.m. again—and it will—we should be ready with two quotes (Standard vs. U.S.‑Cotton), two documentation packs (regular vs. UFLPA‑gold), and one story: “We saw this coming. We engineered your range to be tariff‑resilient, compliant‑by‑design, and margin‑aware. Do you want speed, scale, or the U.S.-cotton capsule? Choose, and we’ll deliver.” If we do this together—factories, mills, BGMEA, and policy teams—Bangladesh can navigate not just the tariff tide, but the next S‑curve of our RMG journey. Sources & Further Reading
• U.S. tariff landscape & apparel duty intensity: USFIA analysis on apparel’s disproportionate share of duties.
• Average apparel tariff rates under reciprocal policy: Sheng Lu (University of Delaware) tracking 2025 apparel tariff averages.
• Bangladesh additional tariff outcome & effective rate: Bangladesh Trade Portal; Fibre2Fashion; BGMEA briefing via The Daily Star.
• U.S. cotton carve‑out & implementation notes: Textile Focus coverage; The Daily Star explainer.
• Bangladesh share & export values (2024): Textile Focus (OTEXA‑based); The Daily Star; LightCastle analysis.
• OTEXA trade data portal (primary source): U.S. Office of Textiles & Apparel.
• UFLPA enforcement & guidance: DHS Entity List expansion; CBP statistics dashboard; U.S. State Department fact sheet; CBP/COAC white paper (June 2025).
• De minimis reform (DTC platforms): CNBC; Newsweek coverage of White House proposals.
• Macro effective tariff rate 2025: Penn Wharton Budget Model (based on USITC DataWeb).
• LDC graduation (date & implications) and U.S. GSP status/exclusions: UN LDC Portal (graduation date); CBP GSP page (lapse); CRS/Guidebooks on apparel exclusion. Share #

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