Bangladesh garment workers await end of Trump tariff tumult

ASHULIA, Bangladesh — As day broke one recent bright morning in Ashulia, a northwestern suburb of Dhaka, thousands of women and men hustled along narrow, potholed roads past security guards directing traffic to protect pedestrians and modulate flows into the area’s clothing factories.

Workers like them in this industrial zone, which alone generates a majority of the export earnings of this nation of 173 million people, have maintained this routine over most of the past year, even as Bangladesh has gone through its greatest period of political tumult since its 1971 war of independence.

The deadly clashes between demonstrators and security forces that led to the revolution of July 2024, ending the long rule of autocratic Prime Minister Sheikh Hasina, and the upheaval that followed forced some clothing factories to close for days. A move to suspend internet services to try to dampen protests disrupted the factories’ communications with clients around the world. Yet garment shipments to overseas customers that month were still higher in dollar terms than a year earlier.

The trade chaos unleashed by U.S. President Donald Trump’s capricious tariff policies have proved a more formidable challenge as they have scrambled the plans of the American clothing brands and retailers that are Bangladesh’s best customers.

Beginning last September, U.S. imports of clothing from Bangladesh climbed at double-digit monthly year-on-year rates of as much as 46%, bringing the South Asian country level with China, long the leader in the American market. But Trump’s global “reciprocal” tariff plan announcement in April quickly spun Bangladeshi exports around.

Garment workers on their way to and from factories in the main industrial zone of Ashulia, Bangladesh, on July 30. (Photo by Rajib Dhar)

With the threat of a tripling of import duties on clothing from Bangladesh, American buyers began pulling back from the country while demanding large discounts from suppliers. Garment makers in turn froze hiring to conserve cash and warned of potential mass layoffs. Weaker companies started to hold back salaries or even halt production, triggering worker protests.

In May, U.S. clothing imports from Bangladesh fell 8.2% from a year earlier. Washington has yet to release June figures, but Bangladeshi export data indicates the decline accelerated beyond 10%. The drop may have gone further in July as Vietnamese apparel factories looked set then to emerge with a big tariff advantage over those of Bangladesh.

On Friday, Bangladeshi clothing makers could at last breathe a sigh of relief. Morning broke with news that Trump had set an additional tariff rate of 20% for the country, the same as he had done earlier for Vietnam.

“Today, we successfully avoided a potential 35% reciprocal tariff,” said Bangladeshi National Security Advisor Khalilur Rahman, who was part of the team of senior officials that flew to Washington for talks this week, in a statement distributed by the government press secretary.

“That’s good news for our apparel sector and the millions who depend on it,” said Rahman, whose team committed Bangladesh to increased purchases of American jets, wheat, cotton, liquefied natural gas and other products. “We’ve also preserved our global competitiveness and opened up new opportunities to access the world’s largest consumer market.”

Sewing machine operators at That’s It Sports Wear, a unit of the Ha-Meem Group, stitch clothes in Ashulia, Bangladesh. (Photo by Rajib Dhar)

Uncertainty about where Trump would set the rate had put Bangladesh’s whole economy on edge. As with many East and Southeast Asian nations, Bangladesh has experienced rapid economic development recently, in large part due to exports of labor-intensive products to Western nations.

In Bangladesh’s case, though, the export base is particularly narrow: Clothing and other textile products account for 90% of the country’s overall exports, and the U.S. is its largest market.

When Trump returned to the White House in January, the U.S. was charging a weighted average import duty of 16.8% on clothes from Bangladesh. His April “Liberation Day” announcement would have added on an extra 37% duty for Bangladesh.

Amid the tension over where the number would end up, a female factory worker in Ashulia who did not want to give her name in late June told Nikkei Asia: “I don’t know what will happen now. Many of us come from rural areas. If there are mass layoffs, we may fall back into poverty.”

A worker checks a roll of fabric at a Ha-Meem Group factory: The company is among Bangladesh’s largest exporters. (Photo by Rajib Dhar)

Ha-Meem Group, which is among Bangladesh’s largest exporters and has around 80,000 employees, has been sending about 90% of its output of pants, shirts, jackets and other garments to the U.S., according to A.K. Azad, company chairman and CEO. Customers include Abercrombie & Fitch, Tommy Hilfiger and American Eagle Outfitters.

Ha-Meem, like many Bangladeshi exporters, largely halted hiring amid the trade upheaval. Md. Masudur Rahman, head of compliance and sustainability, told Nikkei in June that if the 37% rate came into effect, “The company may have no option but to initiate massive job cuts to survive.”

In a report last week with two colleagues, Mustafizur Rahman, a distinguished fellow at the think tank Centre for Policy Dialogue in Dhaka, wrote: “More than 100 RMG (ready-made garment) enterprises of Bangladesh depend exclusively on the U.S. market. About 300 enterprises have more than half of their exports destined for the U.S. market.”

Fabric to be used to make clothes for the American companies Centric and PVH, parent of Tommy Hilfiger and Calvin Klein, at a Ha-Meem Group factory. (Photo by Rajib Dhar)

Bangladeshi garment makers have been on edge with worry that U.S. trade deals with other Asian nations could leave them at a disadvantage. On July 7, five days after announcing that Washington had reached a deal with Vietnam setting a 20% additional tariff rate, Trump said Bangladesh’s rate would be fixed at 35% as of Aug. 1. Since February, Vietnam has been the top source of U.S. clothing imports as shipments from China rapidly declined due to Trump’s punitive tariffs on the country rising as high as 145%.

To remain competitive, Bangladeshi garment companies believed they needed a base rate from Trump that would be no more than 5 percentage points higher than rivals like Vietnam.

“International buyers have made it clear that any tariff gap beyond this ceiling will have to be absorbed by Bangladesh, otherwise they will shift sourcing to other countries,” said Mahmud Hasan Khan, president of the Bangladesh Garment Manufacturers and Exporters Association and managing director of Rising Group, which makes clothes for American retailers including Target, Costco Wholesale and Lands’ End.

The CPD scholars estimated in their report that Bangladesh’s annual U.S. clothing exports would fall 34% to 60% if Trump set the country’s additional import duty at 10% or higher.

While the tariff on Bangladesh-made clothes will not be rising as much as had been feared, Selim Raihan, a professor of economics at the University of Dhaka, cautioned that the full picture is not yet clear since U.S.-China trade talks continue.

Workers trim loose threads at a factory belonging to the Rising Group in Gazipur, Bangladesh, on June 19. (Photo by Rajib Dhar)

“Given China’s central role in global manufacturing and its competitive overlap with Bangladesh in several export categories, the eventual U.S. decision on China’s tariff rate will be pivotal in shaping future patterns of global trade,” Raihan wrote in a Facebook post.

If China’s base rate remains at the current level of 55%, that could drive more business toward Bangladesh; conversely, Bangladesh would lose appeal if the rate gap with China narrows or is eliminated. As it stands, U.S. importers are expected to ask Bangladeshi suppliers to share the financial burden of higher tariffs, according to the CPD team.

“For many enterprises, it will be very difficult to bear the additional burden at a time when [the] price of borrowing, energy cost and, in general, the cost of doing business in Bangladesh have been on the rise,” the team wrote. “Particularly small-size exporters to the USA could find the situation unsustainable.”

Bangladeshi producers will also find it hard to absorb higher tariffs as they have been taking on additional costs to improve environmental and labor practices in line with requests from Western customers. Ha-Meem, for example, has been installing solar panels at its factories, reducing waste and exploring other sustainable practices, but company officials say the tariffs could force a delay in completing some green energy projects.

The prospect of reduced U.S. sales has also been pushing Bangladeshi clothes makers to explore other markets.

Denim Expert, which makes jeans for American brands including DKNY and Sean John, is looking to develop new business in Australia and Japan, according to Director Mohiuddin Rubel.

“We are already supplying products to Kmart Australia,” he said, adding that “these markets have potential for high-value goods.” Yet Rubel worries such measures may not be enough to offset potential U.S. sales losses.

The CPD team expects many producers to increase their sales focus on the European Union, which as a bloc already buys more clothes from Bangladesh than the U.S. But this could result in “more intense competition in those markets and a downward pressure on export prices,” it wrote.

At any rate, Bangladesh’s experience dealing with Trump’s trade demands has forced a reckoning for clothing makers, in the view of Asif Ibrahim, owner of Newage Group, an Ashulia-based garment producer.

“With the right strategy, Bangladesh can turn this challenge into a catalyst for transformation emerging as a more competitive, innovative and respected player in global sourcing,” he said Friday.

In particular, industry executives say, the pressure of U.S. tariffs is likely to lead to more automation of production.

“Machines are replacing RMG workers,” said Ha-Meem’s Masudur Rahman. “Mechanization helps us to reduce the cost of production, enhance efficiency and create zero-waste production within a short time. We are meeting higher demands with less manpower to remain competitive in the international market.”

Ha-Meem has focused especially on automating fabric cutting. At one plant in Ashulia, a factory floor previously filled with workers is now dominated by five automated cutting systems.

An International Labor Day march in Dhaka on May 1: Workers voiced demands for better working conditions and higher wages.    © Reuters

Some workers have benefited from the shift to automation.

Solema Akter Shumi is starting work at a new factory this month in Gazipur, a northern suburb of Dhaka. Although her previous employer shut down suddenly in March after the owner reportedly fled to the U.S., the advancing machining skills she gained there made her an attractive job prospect.

“The heartbeat of our economy is stitched into the hands of these workers who have now come to a mature stage to survive in this profession,” the 31-year-old said.

Some of her former colleagues, like other Bangladeshi workers laid off in recent months, took the old factory’s shutdown badly, staging protests and blocking roads to demand missing salary payments.

Among garment workers still on the job, the potential impact of Trump’s tariffs on livelihoods is a growing worry.

“We didn’t know who Trump was or what he planned to do,” said Arzina Sultana, who works in another Gazipur plant. “But our managers kept talking about a kind of trade war that could affect us.”

“My two children are in school. My entire wage goes to cover their education while my rickshaw-puller husband pays for rent and groceries,” she said. “If I lose my job, their education may come to a halt.”

The article appeared in asia.nikkei