Since 2018, Bangladesh’s economy has faced growing headwinds from global trade tensions and conflicts. For years, the country’s export engine, dominated by ready-made garments (RMG) sold primarily to Western markets, powered robust growth. But new U.S. and global tariffs, combined with wars in Europe and the Middle East, have eroded that momentum. A 2025 analysis notes that Bangladesh’s economy is now “standing in a world where every big player appears to be going in a different direction”. This article details how these crises have cut into Bangladesh’s export earnings, sector by sector, and raises costs both at the border and along the supply chain.
Tariff Wars: Shifting Sources, Shrinking Markets
Bangladesh initially appeared to benefit from the US–China trade war: when the U.S. slapped steep tariffs on Chinese and Indian goods, Bangladesh was spared the worst (its apparel faced a 20% tariff versus 30–50% on China/India). Indeed, this prompted some shifts in orders. In early 2025, U.S. trade data show that Bangladesh’s apparel exports jumped roughly 29% year-over-year (to $2.98 billion in Jan–Apr 2025), capturing orders that had previously moved out of China. At the same time, Bangladesh held about 9.3% of the $85 billion U.S. apparel market (2024), making it the third-largest supplier after China and Vietnam. Bangladesh’s garment factories rely on imported fabrics and low-cost energy. New tariffs on textile imports, along with rising power costs, are squeezing already thin profit margins.
However, this surface gain has been offset by the overall contraction of key markets. The U.S. itself is importing fewer finished garments under the new tariffs. A RAPID study (2025) projects U.S. apparel imports could fall by 14–17% under current tariff rules. As a result, Bangladesh’s exports to the U.S. may decrease by ~14% (about $1.25 billion, primarily apparel). In practical terms, even though Bangladesh exports roughly $10 billion annually to the U.S. (mostly clothing), these changes imply a significant decline in orders. As RAPID’s chairman notes, “with the contraction of the US market, Bangladesh’s exports to the US are likely to decline by 14.3%, or approximately $1.25 billion, of which $1.08 billion would be apparel”. If a U.S.–India deal lowers India’s tariffs, Bangladesh could lose even more ground (another 3–4 percentage points).
Other tariff moves also reshuffle trade. For example, U.S. tariffs on Canada/Mexico/China have indirectly affected commodity prices. Fears of retaliatory cuts have driven down global soybean and wheat prices, potentially reducing Bangladesh’s import bill for edible oil and grain. But on balance, Bangladesh’s exporters see more pain than gain. U.S. policies that provide India and Vietnam with easier access mean increased competition. A garment industry leader warns that Bangladesh’s opportunities will be limited by its own high costs: “Rising costs for gas and electricity are increasing business expenses,” and infrastructure constraints are disrupting production. In short, even as Bangladesh picked up some orders from China’s decline, it faces a squeezed U.S. market and rising production costs.
Similarly, potential changes in other markets pose a threat to Bangladesh’s exports. In Europe, Bangladesh enjoys duty-free access as a Least Developed Country (LDC) – but the EU’s plan to impose a Carbon Border Tax and Bangladesh’s pending graduation from LDC status by 2026 could raise tariffs on apparel and leather. Though not yet in force, exporters fear that after graduation their clothing exports to the EU could face duties of around 12%. In Japan, India is negotiating an FTA that could undercut Bangladesh’s cost edge. And India itself has become a tariff battleground: in 2023, India imposed anti-dumping duties on Bangladeshi jute goods, cutting Bangladesh’s once-strong position in that market.
In short, tariff wars have created a mixed scenario. Bangladesh gained a short-term share in U.S. and EU markets as China was hit, but the overall market share is shrinking. A Bloomberg analysis warns that “increasing global trade costs” from tariffs will raise Bangladesh’s own sourcing expenses. The country’s garment exporters must navigate higher input costs for imported yarn and fabric, as well as stricter compliance requirements, amid pressure from Western brands to lower prices.
Cross-border conflicts: Supply Shocks and Demand Slumps
Far more costly for Bangladesh has been the impact of wars and sanctions. The 2022 Russia–Ukraine conflict triggered multiple shocks. Russia, a traditional buyer of Bangladeshi garments, was sanctioned; Ukraine and Russia were also sources of key inputs (like fertilizer and wheat). Before the war, Bangladesh was sending about $550 million of garments annually to Russia, while importing about $480 million of Russian goods (fuel, wheat, fertilizer). Those flows have “slowed considerably” under sanctions and logistical disruptions. At the same time, cutting Russia out of global energy markets sent oil and gas prices soaring. Bangladesh’s import bill for fuel, fertilizers and food has “risen sharply” since 2022. Those higher costs squeeze industry margins and widen the trade deficit – Bangladesh’s central bank reported a widening current account shortfall in 2022-24 as imports of energy and commodities jumped.
Bangladesh’s main seaport (Chattogram) handles nearly all exports. However, recent Red Sea attacks and disruptions to the Red Sea canal have increased maritime insurance and freight costs, slowing deliveries and adding to exporters’ bills.
Meanwhile, the Ukraine war has slowed Europe’s economy, Bangladesh’s other major market. European buyers have faced inflation and uncertainty, resulting in a decline in orders for non-essential goods. Employers in Bangladesh report a “shortage of work” and postponed orders. Garment factories across Bangladesh have reported declining orders and idle capacity. In short, two of Bangladesh’s biggest customers (the U.S. and EU) are buying less, even as input costs from oil, shipping and food climb.
Other conflicts have hurt niche sectors: e.g., fighting in Sudan (one of the largest markets for Bangladeshi jute products) has stalled exports. The Daily Star reports Sudan’s civil war cut jute demand, contributing to a 29% plunge in exports of jute yarns and twines in 2022-23. Regional instability in the Middle East (such as missile attacks on Red Sea shipping in 2023) has also driven up shipping insurance premiums. Analysts warn that if conflicts block routes like the Red Sea or Hormuz, “shipping insurance costs go up, so do overall shipping costs”. All told, geopolitical crises are raising costs at every step: from energy and raw materials to the final sea freight.
Sectoral Impacts: Winners, Losers, and Numbers
The direct fallout is visible in the export figures. Almost every major export sector outside RMG has seen declines:
Jute and Jute Goods: Bangladesh’s traditional jute industry suffered a sharp decline in FY2023. Jute goods exports fell 19% to about $912 million, down from over $1.1 billion the year before. Key reasons include an Indian anti-dumping duty on Bangladeshi jute goods and stiff competition from alternative fibers. Lower demand in markets like Turkey (for carpets) and conflict in Sudan further slashed orders. In particular, exports of jute yarn and twine – critical inputs for carpets – collapsed by 29% in FY23. Industry leaders say the losses will linger “unless the war situation improves”.
Leather and Footwear: These export categories saw moderate drops in FY2023. Footwear exports (mostly leather shoes) fell 6.9% to about $703 million, and raw leather exports plunged 18.5% to only $123 million. Exporters attribute the slump largely to weaker European demand and rising production costs. As with other sectors, firms face higher energy and material expenses, eroding competitiveness.
Frozen Fish and Shrimp: Bangladesh’s seafood export earnings slid 21% in 2022-23 (to $422 million). Rising seafood prices and expectations of adverse weather had already strained Bangladesh’s shrimp industry, as higher input and feed costs outweighed any potential gain from export prices. Then, the war in Ukraine further depressed demand in Europe, the key market for Bangladeshi shrimp. Indeed, fishers note that shrimp (nearly 60% of this category’s exports) were hit by both flooding weather and “falling consumption in our main markets owing to the impact of the Russia-Ukraine war”.
Agricultural and Other Items: Non-seafood agricultural exports mostly declined, too. For example, a ban on aromatic rice exports in 2022 (an environmental measure) directly cut about 30% from the country’s agricultural export earnings. Meanwhile, airfreight costs soared after fuel prices increased, making perishables (such as fruits and vegetables) uncompetitive abroad. Small-scale exports, such as fruits, jute-based handicrafts, and pharmaceuticals, experienced slower growth or slight declines amid global inflation and credit crunches.
Indirect Costs: Rising Bills Behind the Scenes
Alongside lost sales, Bangladeshi exporters face a cascade of hidden costs. First, input prices have spiked. Bangladesh imports most of its fabric, cotton, oil, and fertilizer. The post-2018 trade wars and war-driven commodity crunch have lifted these prices. For example, U.S. tariffs on Chinese soybeans in earlier years had at times lowered world soy/oil prices, but under the Biden administration, soy costs nearly doubled again, raising edible oil import costs. More critically, oil and gas prices surged in 2022-23, lifting the domestic cost of electricity and transportation. Notably, Business Standard reports that Bangladesh’s fuel and energy import bills “have risen sharply” due to Russian sanctions.
Fertilizer is another concern: Russia and Belarus supply much of the world’s potash and urea. Disruptions have made fertilizer costly globally, forcing Bangladeshi farmers (and textile/tea exporters) to pay more for inputs. The result is higher production costs per unit. Manufacturers now report squeezed profit margins: even as volume grew, selling prices barely budged. The ApparelViews data show that Bangladesh’s unit export price rose only 0.8% in 2025, far less than its competitors.
Logistics have also become costlier. As noted, conflicts in the Red Sea and other shipping lanes have raised freight insurance costs. Shipping lines have added war-risk surcharges for containers bound for South Asia. These charges, plus higher bunker-fuel costs, mean each shipment of garments or jute costs a few percentage points more. In a commodity business like RMG (where final price marks are thin), these added logistics fees can wipe out profit.
Finally, some non-tariff policy changes loom as new indirect costs. Bangladesh’s planned graduation from LDC status will phase out preferential duties in many markets. Coupled with the EU’s Carbon Border Adjustment, certain exports might face a double “tariff shock” after 2026. Preparing for these future costs is now an additional burden on exporters, who must invest in cleaner production without guaranteed tariff relief.
Bangladesh’s export sectors are under growing pressure as trade wars have reduced access to key markets like the U.S. and increased competition, while international conflicts have pushed up costs and weakened demand in Europe and elsewhere. Exports beyond garments and a few niche products have declined sharply; shrimp exports dropped 21%, jute goods by 19%, and leather shipments by double digits, while garment exports risk losing approximately $1.25 billion if current tariffs remain. Rising prices of fuel, fabric, fertilizer, and transport are adding further strain. Experts warn that Bangladesh must expand both its product offerings and markets to recover from these setbacks.
Author: Tasnim Safwan
