By Siam Parvez, The Voice, Dhaka
The Asian Development Bank (ADB) has issued a cautionary outlook for Bangladesh’s economy in its July update of the Asian Development Outlook, signaling a downward revision of GDP growth projections for the fiscal year 2025–26. The forecast adjustment comes in response to looming U.S. reciprocal tariffs and a slowdown in both the industrial and export sectors.
The newly imposed 35% U.S. tariff—down from an initially proposed 37%—is set to take effect on August 1, and is expected to heavily impact Bangladesh’s readymade garments (RMG) industry, which comprises about 90% of the country’s exports to the United States. The U.S. is Bangladesh’s largest single export market, accounting for 19% of apparel shipments. With Bangladesh maintaining a large trade surplus with Washington, the tariff move is seen by analysts as both economic retaliation and a geopolitical maneuver.
While the ADB did not publish country-specific figures in the July report, its April 2025 projection had placed Bangladesh’s GDP growth at 5.1% for FY2025–26. Inflation was forecast to ease to 8%, a modest relief after a three-year high. Bangladesh Bureau of Statistics (BBS) data show inflation fell to 8.48% in June 2025, the lowest since July 2022. Food inflation, however, remains a serious concern, peaking at 14.10% in July 2024 and staying above 10% for several months.
Also see: Bangladesh Bank’s Monetary Policy
A July 24 study by the Centre for Policy Dialogue (CPD), titled “Trump Reciprocal Tariffs and Bangladesh: Implication and Response“, warns that even a 5% additional tariff on the Freight on Board (FOB) price would be difficult to absorb. The burden would hit small and medium-sized enterprises (SMEs) the hardest, as many operate with razor-thin margins amid soaring energy costs and tightening global credit.
The CPD study, co-authored by economists Mustafizur Rahman, Anika Tasnim Arpita, and Tanbin Alam Chowdhury, highlights not just the economic fallout but also the strategic dimension of the U.S. decision. It argues that the tariff hike is part of Washington’s broader Indo-Pacific realignment.
“Bangladesh will need to navigate all these complex issues by considering its trade interests with the USA and also by taking into cognisance the implications of its response for the country’s bilateral relationships with other countries,” the CPD warns, urging Dhaka to adopt a stronger negotiation strategy and rethink its multilateral obligations ahead of the country’s graduation from Least Developed Country (LDC) status.
The report criticizes the government for not challenging the U.S. tariff framework’s non-disclosure clause and for excluding stakeholders from its negotiation strategy.
Disruptions are already evident. According to the CPD, Bangladeshi producers are receiving discount demands from foreign brands, as buyers try to split the cost of the tariff burden with local suppliers. Compounding the pressure, compliance expectations from Western buyers—related to environmental standards, labor rights, and carbon reduction—are also tightening.
Moody’s has joined in warning that Bangladesh’s export-reliant banking sector is especially vulnerable. The global rating agency says banks could face increased credit stress due to the ripple effects of falling export orders and foreign exchange volatility. “The tariff shock could exacerbate existing problems… such as poor asset quality and low capital buffers,” the CPD noted.
The ADB’s July update reaffirms inflation control as a key challenge. While tighter fiscal policies and stable global commodity prices have helped ease inflation recently, the country remains at risk, particularly if export earnings drop sharply post-tariff implementation.
As the August 1 deadline nears, the urgency grows for Bangladesh to develop a robust diplomatic and economic response. Economists are calling for the establishment of a permanent negotiating wing to manage complex trade relations and prepare the country for life beyond LDC status.
