Bangladesh, the world’s second-largest garment exporter, is grappling with mounting challenges that threaten its position in the global apparel market. A recent imposition of a 37 percent tariff by the Trump administration on Bangladeshi exports to the United States has intensified pressures on an industry already strained by regional competition, structural inefficiencies, and a sluggish transition to higher-value production. As the sector, which accounts for a significant portion of the country’s economy, faces this critical juncture, industry leaders and analysts warn that without swift reforms and strategic trade diplomacy, Bangladesh risks losing ground to competitors like Vietnam.
Tariff Shock and Global Market Dynamics
The new US tariffs, introduced as part of broader trade policies under the Trump administration, have sent shockwaves through Bangladesh’s garment sector, which relies heavily on price-sensitive markets. In 2023, the country exported apparel worth $38 billion, securing a 7.4 percent share of the global market, according to the World Trade Organization (WTO). This placed Bangladesh behind only China, whose exports were valued at $165 billion with a 31.6 percent market share. However, the recent tariff hike—higher than in previous years—directly undermines the cost competitiveness that has long been the backbone of Bangladesh’s business model, built on low-wage labor. 
Industry leaders have voiced alarm over the potential fallout. Rubana Huq, former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), emphasized the urgency of adaptation. “If we don’t move fast, we will not be able to save the day” she said. Her concerns are echoed by Tapan Chowdhury, a prominent garment exporter and managing director of Square Pharmaceuticals, who noted that while Bangladesh retains a competitive edge over Vietnam—whose exports face an even steeper 46 percent tariff in the US—the gap could narrow if structural challenges remain unaddressed.
Beyond tariffs, Bangladesh faces additional hurdles as it approaches its graduation from least developed country (LDC) status in November 2026. While countries like the European Union, the United Kingdom, Canada, and Australia have pledged to extend duty-free access beyond this date, industry experts caution against complacency. Anwar-Ul-Alam Chowdhury, chairman of Evince Group, stressed the need for proactive diplomacy to mitigate the impact of both the US tariffs and the LDC transition, urging the government to negotiate free trade agreements (FTAs) with major trading partners and deepen engagement with Asian markets such as China, India, and Japan.
Vietnam’s Ascent and the Competitive Edge
Perhaps the most immediate threat to Bangladesh’s standing comes from Vietnam, which exported $31 billion in garments in 2023, capturing a 6 percent global market share. Despite facing higher US tariffs, Vietnam has made significant strides in diversifying its product base and moving up the value chain, leveraging free trade agreements to secure preferential market access. The EU-Vietnam FTA, for instance, has positioned the Southeast Asian nation to expand its foothold in Europe, a market where Bangladesh currently holds a strong position with annual shipments exceeding $25 billion.
Mohammad Abdur Razzaque, chairman of Research and Policy Integration for Development, highlighted Vietnam’s structural advantages, including substantial foreign investment—particularly from China, which has poured an estimated $61 billion into Vietnam’s textile and garment sectors. By contrast, Bangladesh’s $55 billion industry relies on less than 5 percent foreign investment. While this relative independence could appeal to US buyers wary of Vietnam’s ties to China, Razzaque warned that Bangladesh must address its limited capacity in man-made fiber (MMF) garments—a segment critical to filling gaps left by declining Chinese exports in the US market.
Faruque Hassan, managing director of Giant Group, offered a nuanced perspective on the rivalry, noting that Vietnam’s export figures often combine textiles and garments, unlike Bangladesh, which reports garments alone. “If we exclude textiles from Vietnam’s numbers, it will take more time for them to overtake us” he said. Nonetheless, he underscored the need for Bangladesh to explore new markets, diversify products, and invest in technology to maintain its edge.
Structural Strengths and Persistent Weaknesses
Bangladesh boasts several inherent strengths that have sustained its position in the global apparel trade. The country benefits from a large, affordable labor force, a robust $25 billion primary textile sector providing strong backward linkages, and a global lead in certified green factories. Compliance with international safety standards has also improved, particularly in the wake of past tragedies like the Rana Plaza collapse in 2013, which prompted widespread reforms.
Yet these advantages are increasingly offset by systemic challenges. Underdeveloped infrastructure, extended lead times for shipments, high borrowing costs for manufacturers, bureaucratic inefficiencies, and an overreliance on low-value, basic garments hinder the industry’s ability to compete in a rapidly evolving market. Rubana Huq, also managing director of Mohammadi Group, cautioned against relying solely on the growth of basic apparel. “Relying solely on the continued growth of basic garments is no longer a viable strategy” she said, advocating for diversification, technological upgrades, and workforce skilling to meet shifting global demands.
Exporters like Tapan Chowdhury echo this call for a pivot to high-value products to withstand price pressures from international retailers. “International retailers and brands always offer lower prices for basic items. Exporters must adopt the right strategies and be selective in choosing buyers to offset challenges” he advised. Without such a shift, Bangladesh risks being outpaced by competitors who offer differentiated, value-added products.
Navigating a Path Forward
As Bangladesh confronts these multifaceted challenges, the path forward hinges on both internal reforms and external engagement. Industry leaders and analysts agree that the government must prioritize improvements in customs services, port operations, utility provision, and the removal of non-tariff barriers to enhance export efficiency. Mostafa Abid Khan, a former member of the Bangladesh Trade and Tariff Commission, warned that even a 10 percent tariff burden could strain many local exporters, underscoring the need for policy measures to cushion the impact.
At the same time, strategic trade diplomacy will be critical. Anwar-Ul-Alam Chowdhury suggested that Bangladesh could position itself to attract new orders as global sourcing patterns shift away from China and Vietnam under US tariff pressures. However, this opportunity depends on the country’s ability to negotiate favorable trade terms and address capacity constraints, particularly in MMF production.
Despite the looming threats, some exporters remain optimistic. Md Fazlul Hoque, managing director of Plummy Fashions Ltd, dismissed speculation that Vietnam is poised to overtake Bangladesh. “For years, people have been saying that Vietnam will surpass us, but that hasn’t happened. Bangladesh remains competitive and continues to grow” he said. Hoque emphasized that meeting market demand, rather than fixating on rankings, is the key to climbing higher in the global apparel trade.
Looking Ahead Amid Uncertainty
As Bangladesh navigates this pivotal moment, the resilience of its garment industry— a cornerstone of the national economy—will be tested. The interplay of US tariffs, regional competition, and impending LDC graduation presents a complex landscape, but also an opportunity for reinvention. Whether the country can maintain its hard-earned position as the world’s second-largest garment exporter remains an open question, one that will depend on its ability to adapt, innovate, and engage on the global stage.
For now, the industry stands at a crossroads, with stakeholders watching closely for signs of reform and renewal. As Rubana Huq aptly put it, “Bangladesh will lose its competitive edge if we can’t engage in active economic diplomacy.” The coming months and years will reveal whether the nation can turn challenges into catalysts for sustainable growth.
