Why US-Bangladesh rushed through a pre-election trade deal

On February 9, just 72 hours before a transformative general election in Bangladesh, a high-level delegation from Dhaka will gather in Washington to finalize a trade agreement that could fundamentally reshape the country’s economic trajectory.

While domestic critics have characterized the timing as a calculated move by the interim administration to secure international legitimacy on the eve of a defining election, the deal is anchored in a deeper and more existential set of economic imperatives.

As Bangladesh navigates the precarious final months before its graduation from Least Developed Country (LDC) status in November 2026, the “Cotton-for-Garments” deal represents a strategic attempt to shield the country’s export-driven model from a global trade environment that is increasingly hostile to its traditional advantages.

The economic precipice facing Bangladesh is stark. Scheduled for November 24, 2026, the country’s graduation marks the end of an era defined by nonreciprocal, duty-free market access that has sustained its manufacturing sector for decades.

For a nation where the ready-made garment sector accounts for roughly 85% of export earnings, the stakes of this transition are immense.

Policy analysts have warned that the loss of preferential access could lead to an annual decline in export revenue of up to US$8 billion, a shock that would impact everything from foreign exchange reserves to industrial employment.

This vulnerability has been exacerbated by the aggressive expansion of regional garment-making competitors such as Vietnam and Cambodia, both of which have secured more durable trade arrangements with Western markets.

In the US, which remains Bangladesh’s single largest destination for apparel exports, the competitive landscape has already begun to sour. By late 2025, Bangladeshi exporters were grappling with a new 20% reciprocal tariff that pushed the effective duty on certain garment categories as high as 36%.

This “tariff wall” contributed to a measurable decline in export volumes, even as US consumer demand remained stable. However, the new trade agreement seeks to dismantle this wall through an innovative supply chain-linked framework.

Under the deal’s “square-meter for square-meter” logic, Bangladesh would receive tariff-free access for apparel in direct proportion to its imports of US-produced raw cotton and man-made fibers. This mechanism reflects economic pragmatism, addressing US goals of expanding agricultural exports while providing Dhaka a tariff cushion to maintain price competitiveness.

Beyond immediate tariff relief, the agreement mandates a suite of institutional reforms long sought by Washington. To unlock the proposed reduction of the reciprocal tariff from 20% to 15%, Dhaka has agreed to a moratorium on e-commerce tariffs and has pledged to align its intellectual property rights (IPR) standards with international benchmarks.

Bangladesh has also committed to supporting US reform initiatives at the World Trade Organization (WTO), signaling a shift away from traditional G-77 bloc dynamics toward a more interest-based alignment with Western trade policy.

These concessions reflect a recognition in Dhaka that the post-LDC world requires a more sophisticated regulatory environment to attract the high-quality foreign direct investment (FDI) needed for industrial diversification.

The political context of the deal is significant. The interim administration, led by Nobel laureate Muhammad Yunus, is operating under the weight of the July Charter, the ideological foundation of the 2024 revolution.

As the country approaches February 12 national elections, the trade deal serves as a tangible demonstration of the administration’s ability to stabilize the economy and reset relations with the West.

It signals to both domestic voters and international investors that Bangladesh remains open for business regardless of political transition.

By securing the agreement now, just before the polls, the Yunus administration is effectively embedding a pro-Western commercial orientation into the country’s future policy framework, complicating any attempt by a subsequent government to reverse course.

Geopolitically, the pact allows Bangladesh to maintain its delicate balancing act in an increasingly multipolar region. While Dhaka has leaned heavily on Chinese investment for infrastructure and Indian cooperation for regional security, the US remains a primary source of FDI and the ultimate consumer of its industrial output.

A deeper commercial partnership with Washington provides a counterweight, ensuring Bangladesh does not become overly dependent on any single regional power, including India and China. It also offers a pragmatic channel to stabilize a relationship periodically strained by US scrutiny of Bangladesh’s human rights record and democratic standards.

By anchoring ties in mutual economic gain—cotton for garments—both sides have found a way to compartmentalize past political disagreements in favor of strategic stability.

However, the signing of the agreement marks only the end of the beginning. The true test of the Cotton-for-Garments model will lie in its implementation after the election ballots are counted.

Historically, Bangladesh has struggled with the last mile of trade facilitation. Weak port infrastructure, bureaucratic delays in customs and limited transparency in labor enforcement have often undermined the benefits of preferential access.

To capitalize fully on this new US agreement, the next government will need to pursue aggressive reforms in logistics and digital trade infrastructure. If the deal becomes instead a political trophy rather than a catalyst for structural reform, the 15% tariff rate may still prove too high for an industry facing rising energy and labor costs in a postrevolutionary economy.

The deal will also force a broader conversation about the sustainability of Bangladesh’s export model. While the cotton scheme provides a temporary lifeline for the ready-made garment sector, it does not address the deeper need for diversification into higher-value manufacturing and services.

The US emphasis on digital trade and IPR points toward these sectors, but the transition will require large-scale investment in human capital that has yet to materialize. In this sense, the Cotton-for-Garments logic is a defensive maneuver, preserving the status quo for a few more years as Bangladesh searches for its next export breakthrough.

As the world watches Bangladesh’s pivotal elections, the February 9 signing ceremony in Washington is a powerful prologue to change. It is a reminder that in South Asian geopolitics, economic security is the ultimate arbiter of political durability.

For Bangladesh, the window to prepare for life after LDC graduation is closing fast and the US trade deal may be the most consequential tool it has acquired to ensure that when the window shuts, the lights in garment factories do not go out.

Whether the agreement becomes the foundation of a new era of prosperity or a footnote in Bangladesh’s economic contraction will depend largely on the political will of the government that emerges from the forthcoming polls.

Md Obaidullah is a visiting scholar at Daffodil International University in Dhaka and a graduate assistant in the Department of Political Science at the University of Southern Mississippi. He has published extensively with Routledge, Springer Nature and SAGE. He also regularly contributes to platforms including the LSE South Asia blog, The Diplomat, East Asia Forum, The Geopolitics, Modern Diplomacy, The Business Standard, Daily Observer, New Age and Dhaka Tribune.