Bangladesh’s ready-made garment (RMG) sector, a lifeline for millions and a major export-earner, is navigating a turbulent phase. While anger has been defused by a reduction in US import duties, the industry now confronts a new array of challenges.
The U.S. recently scaled down a proposed extra tariff on Bangladeshi apparel from 35 % to 20 %. National security adviser Khalilur Rahman framed it as a diplomatic success that could safeguard thousands of jobs, and Interim Prime Minister Muhammad Yunus hailed it as a “decisive diplomatic victory” .
However, when combined with an existing 16.5 % duty, the total effective tariff rises to approximately 36.5 %, undermining most of the unexpected relief.
BGMEA President Mahmud Hasan Khan underlined the difficulty, noting that exporters will still bear a higher duty burden, limiting price advantage.
While the revised rates bring Bangladesh closer to competitors like Sri Lanka and Pakistan in tariff terms, Vietnam continues to benefit from more favorable preferential trade agreements .
Rising Production Costs & Competitive Pressure
The garment industry faces rising operational expenses: wage hikes, energy price surges, and compliance costs tied to labor and environmental regulations are eroding profit margins.
Factory heads like Abdul Wadud of Winter Group point out that despite the tariff easing, increasing input costs make Bangladeshi goods more expensive for US buyers—forcing manufacturers to lean more heavily on productivity improvements and innovation to stay competitive.
Global supply chain headaches and fluctuating post-pandemic demand are intensifying the pressure, while regional rivals like Vietnam and India boast advantages in raw-material access, infrastructure, and trade terms .
Automation: A Double-Edged Sword
With buyers pushing harder to contain costs, the shift toward automation seems inevitable. While technological adoption can enhance productivity, a 2024 study observed a dramatic 30.6 % reduction in factory employment, mainly affecting women and low-skilled workers.
The RMG workforce—once over 5 million strong—has dwindled to under 3.2 million. Experts warn that continued automation, spurred by buyer pressure, could exacerbate job losses, jeopardizing the livelihoods of vulnerable workers .
Internal Challenges: Buyer Pressure & Unethical Competition
Industry leaders are also highlighting internal challenges: unhealthy competition and buyer pressure. Mohammad Hatem of BKMEA criticized exporters for succumbing to unfair pricing demands, stating that this internal weakness leaves them more vulnerable. During a temporary 90-day tariff freeze, buyers forced exporters to absorb part of the 10 % levy—a move the industry vows not to repeat .
Calls for Policy Support and Strategic Reform
With industry margins under siege, exporters are urging government intervention. A. K. Azad of Ha-Meem Group lamented the lack of timely cash incentives and proposed even temporary suspensions of source tax to mitigate the crisis .
Experts suggest a multi-pronged strategy: modernizing production processes, enhancing workforce skills training, diversifying raw-material sources—including sourcing more U.S. cotton to meet new exemption criteria—and aggressively pursuing improved trade agreements.
University of Delaware’s 2025 Fashion Industry Benchmarking Study reports that over 70 % of U.S. fashion firms have seen elevated sourcing costs and shrinking profits, with nearly half postponing or canceling orders—many passing losses onto suppliers in Bangladesh .
Navigating the Road Ahead
Bangladesh’s RMG sector remains resilient. As the second-largest apparel exporter globally, it still controls a significant share of the U.S. market—nearly 30 % of its garment exports .
However, maintaining competitiveness will depend on rapid adaptation. Policymakers and industry leaders alike recognize that surviving this phase will require innovation, collaboration, and strategic investment. Otherwise, what appeared to be a trading opportunity may become an existential crossroads for one of Bangladesh’s most important industries.
