Bangladesh’s Strategy to Mitigate U.S. Tariffs: A Cotton Import Initiative
Bangladesh plans to import U.S. cotton to avoid potential tariffs from the Trump administration amid a $6.2 billion trade deficit. This strategy aims to protect its apparel industry, already facing significant tariffs. The government will also work to improve domestic cotton production while preparing for challenges following its upcoming graduation from the UN’s Least Developed Countries status.
Bangladesh is planning to import more cotton from the United States to mitigate the potential impact of tariffs proposed by the Trump administration. This strategy aims to address the significant trade deficit, which reached $6.2 billion in 2024, up from $6 billion the previous year. Foreign affairs adviser Md. Touhid Hossain explained that this importation of U.S. cotton is designed to dissuade the imposition of further tariffs on Bangladeshi goods, especially in the apparel sector, which currently faces a 15.6 percent tariff.
The Bangladeshi government recognizes the importance of increasing domestic cotton production, currently meeting only 3 percent of national demand. Hossain stated that an interim government will soon classify cotton as an agricultural product and introduce subsidies to boost production. Additionally, he advocated for the removal of the existing 4 percent advance income tax on domestically produced cotton.
Vietnam is undertaking similar efforts to counteract tariffs driven by trade deficits, engaging with U.S. officials to foster economic benefits and eliminate trade barriers. However, Bangladesh faces another looming challenge: the graduation from the United Nations’ Least Developed Countries category in November 2024. This transition could lead to an increase in tariffs on apparel imported by the European Union from zero to approximately 12 percent by 2029.
Despite the tariffs posed by other nations, including China’s additional levies on U.S.-grown products, which includes cotton, there are efforts to support U.S. farmers. The U.S. Department of Agriculture has initiated the Emergency Commodity Assistance Program, allocating up to $10 billion to assist agricultural producers, with cotton farmers receiving up to $84.74 per acre to help offset rising operational costs and declining commodity prices.
In summary, Bangladesh strategically aims to import cotton from the United States to counter potential tariffs imposed by the Trump administration, addressing its significant trade deficit. The government plans to enhance domestic cotton production and remove existing tax burdens to stabilize the industry. At the same time, Bangladesh must prepare for post-UN LDC graduation challenges, particularly regarding tariff increases from the European Union. Overall, these moves reflect a proactive approach to maintaining its trade relationships while preparing for future economic shifts.
Original Source: sourcingjournal.com
