US-Bangladesh trade deal the lifeline Dhaka needs

The recent US-Bangladesh trade deal, finalized on February 9, 2026, represents an upper hand in economic preservation, securing Dhaka’s US$8 billion export corridor to the US amid an increasingly protectionist global landscape.

While some analysts, including those at the Centre for Policy Dialogue (CPD) think tank, have characterized the bilateral pact as a hurried capitulation, a closer examination of the trade data and specific tariff schedules suggests a calculated exercise in asymmetric bargaining.

Bangladesh’s interim government’s negotiation strategy successfully leveraged symbolic market concessions to gain structural advantages in the garment sector, effectively insulating the nation’s primary source of foreign exchange from the existential threat of prohibitive American duties.

The timeline of the negotiation itself refutes the narrative of impulsive decision-making. Following America’s imposition of a 37% tariff on Bangladeshi exports on April 3, 2025, officials engaged in a 10-month deliberative process to lower the levy to a more manageable 19% general rate while carving out a 0% tariff pathway for specific high-volume goods.

The controversy lies mainly in the provision granting zero-tariff access to 1,500 American products. However, the composition of this list reveals a tactical “phantom concession.”

The items granted duty-free access consist primarily of commodities for which there is negligible demand or infrastructure in Bangladesh, including beef, dairy, horses, and luxury specialty fruits like avocados. Historically, Bangladesh’s import volume of these specific US goods has been statistically insignificant.

By removing tariffs on products that do not compete with domestic industries and for which there is little cultural or commercial appetite, Dhaka provided the US executive branch with a political victory on market access without incurring any actual economic cost.

This maneuver allowed Bangladesh to secure high-value protections for its own industries by trading away nominal entry points that exist only on paper, a classic hallmark of pragmatic trade diplomacy.

The urgency of the deal was dictated by the severe reality of the 37% “universal” tariff regime initially proposed by Donald Trump.

For a nation where the ready-made garment sector accounts for more than 80% of total foreign exchange earnings, such a tariff would have led to a catastrophic contraction of the manufacturing base, resulting in mass unemployment and a systemic balance-of-payments crisis.

By negotiating the general tariff down to 19%, and, crucially, securing a 0% tariff for garments manufactured using US-sourced cotton or man-made fibers, the interim government created a competitive moat for its exporters.

This zero-tariff clause is particularly significant because it transforms the supply chain from a liability into a strategic asset. By linking duty-free access to the American market with the use of American raw materials, Bangladesh has created a closed-loop economic system that satisfies the “reciprocal trade” mandates of the Trump administration while providing Bangladeshi factories with a distinct price advantage over regional competitors.

This shift in the textile supply chain has profound implications for regional geopolitics, specifically regarding the long-standing dominance of Indian cotton in the Bangladeshi market.

Historically, India has been the primary supplier of raw cotton to its neighbor, with Bangladesh often absorbing more than 70% of India’s total cotton exports. The new US–Bangladesh agreement incentivizes a pivot away from this dependency.

Indian textile exporters, who recently negotiated an 18% reciprocal tariff with the US, now find themselves at a significant disadvantage. Bangladeshi manufacturers utilizing US cotton can enter the American market at 0%, giving them a 19-percentage-point lead over their Indian counterparts.

This structural shift is already generating friction in New Delhi, as it threatens to erode India’s market share in both raw material exports and finished textile goods.

For Dhaka, diversifying raw material sources is a strategic move to reduce its vulnerability to regional supply shocks and political leverage. Addressing the $6 billion trade deficit with the US was another pillar of the agreement, achieved through long-term capital investments rather than immediate cash outflows.

The acquisition of 14 Boeing aircraft for Biman Bangladesh Airlines, valued at approximately US$2.86 billion, is a centerpiece of this strategy. Rather than a lump-sum payment that would deplete foreign reserves, the deal is structured over a 15- to 20-year cycle, resulting in an annual commitment of approximately $125-165 million.

This expenditure serves the dual purpose of modernizing a decaying national fleet—essential for expanding international trade routes—and demonstrating a commitment to high-value American imports.

Similarly, the commitment to import US soybeans and wheat represents a redirection of existing trade flows rather than an increase in total import volume.

Bangladesh is a net importer of these staples for food security; by shifting the source of these imports to its largest export partner, Dhaka fulfills the requirements of a “fair trade” partner without increasing its overall debt burden or harming domestic agriculture.

The primary failure of the interim government probably lies in its inability to communicate these nuances to a skeptical public. By allowing the 1,500 items figure to circulate without the context that these goods are non-competing, officials permitted a narrative of national insolvency to take root.

However, the data confirms that waiting for an elected government to assume power—a potentially time-consuming process—would have cost the nation billions of dollars in realized tariffs and potentially permanent losses in garment market share to competitors in Vietnam and Cambodia.

In an era where the US has signaled a willingness to impose tariffs as high as 50% on noncompliant partners, securing a 0% pathway for the nation’s most vital industry represents a significant achievement in economic foresight.

The agreement does not represent a loss of sovereignty but rather a sophisticated adaptation to the new realities of global trade, ensuring that Bangladesh remains a central node in the global textile value chain while insulating its economy from the volatility of protectionist shifts.

The long-term success of this pact will depend on how quickly the Bangladeshi private sector can integrate US raw materials into its production lines to take advantage of the 0% route. Currently, infrastructure for man-made fiber production and high-grade cotton processing is being scaled to meet this new demand.

By trading a manageable 19% general tariff for the possibility of 0% on specialized goods, the interim government has provided a roadmap for the evolution of the garment sector from low-value assembly to a more integrated, high-value manufacturing model.

The deal effectively converts a potential trade conflict into a mutually beneficial partnership, while securing Dhaka’s economic interests for at least the remainder of the decade.

Faisal Mahmud is the minister (Press) of the Bangladesh High Commission in New Delhi