Bangladesh plans to import more U.S. cotton to avoid potential tariffs proposed by the Trump administration as part of a trade deficit strategy. Despite current U.S. tariffs on Bangladeshi goods, the country aims to bolster its domestic cotton production. Additionally, challenges related to LDC graduation may affect future trade dynamics. U.S. farmers are also receiving support amid escalating costs and tariffs from China.
Bangladesh’s recent strategy to mitigate potential tariffs proposed by the Trump administration involves increasing imports of cotton from the United States. Foreign Affairs Adviser Md. Touhid Hossain articulated this approach, emphasizing that it seeks to address the trade deficit issue that has been a focus of President Trump’s policies. In 2024 alone, the United States imported $8.4 billion from Bangladesh, while Bangladesh’s exports amounted to $2.2 billion, resulting in a significant trade deficit of $6.2 billion compared to the previous year.
Hossain pointed out that Bangladesh’s goods, including clothing, are already facing U.S. tariffs, such as the 15.6 percent duty on apparel. Importing U.S. cotton is intended to develop a situation where the U.S. government would be less inclined to impose additional tariffs. This strategy was discussed during a joint event hosted by the Economic Reporters Forum and the Bangladesh Cotton Association, as reported by the Dhaka-based Business Standard.
Despite this strategic move, Hossain emphasized the necessity for Bangladesh to enhance its domestic cotton production. Currently, domestic cultivation meets only 3 percent of national demand, despite cotton being a vital cash crop. He anticipates that the interim government will soon classify cotton as an agricultural product and plans to introduce subsidies to increase its cultivation within three months. He also called for the abolition of a 4 percent advance income tax on locally produced cotton.
In the context of trade, other countries such as Vietnam are also taking measures to counteract tariff threats. Vietnamese officials recently engaged with U.S. Trade Representative Jamieson Greer to discuss maximizing mutual economic benefits and reducing trade barriers hindering American investments in Vietnam.
Bangladesh is also facing the challenge of graduating from the United Nations’ Least Developed Countries (LDC) category next November, which would lead to the loss of certain trade advantages. Hossain noted that while this change would likely increase tariffs on apparel exports to the European Union from zero to approximately 12 percent by 2029, Bangladesh will continue to benefit from duty-free access for an additional three years post-graduation. He expressed confidence in the business community’s readiness to adapt within the grace period.
The effectiveness of Bangladesh’s strategy in supporting U.S. cotton farmers remains uncertain, especially in light of China’s recent imposition of a 15 percent tariff on U.S. cotton. U.S. farmers are also grappling with high operational costs and decreasing commodity prices amidst federal budget cuts. Nevertheless, the U.S. Department of Agriculture has announced a plan to provide up to $10 billion to assist agricultural producers for the 2024 crop year, ensuring support for upland and extra-long staple cotton farmers with payments of $84.74 per acre.
In conclusion, Bangladesh is proactively seeking to strengthen its trade relationship with the United States by importing more cotton to potentially avoid increased tariffs. This move comes in response to trade deficit concerns raised by the Trump administration. Despite challenges such as a need for domestic cotton production increases and the impact of LDC graduation, officials are optimistic about future strategies to adapt to changing trade dynamics. Furthermore, support measures are being introduced for U.S. cotton farmers facing economic pressures.
Original Source: sourcingjournal.com
