SINCE Donald Trump took office once again as the 47th president of the United States, the re-imposition of tariffs on global imports has brought the issue of trade wars back to the forefront of policy and academic debate. While the first Trump presidency initiated the use of tariffs and non-tariff barriers — including the restriction of access to strategic technologies — to target Chinese firms, these measures did not abate under president Joe Biden. On the contrary, the policies were sustained and expanded in scope. The resurgence of Trump in 2025 signals an even more determined pursuit of this agenda, with wider implications across the global trading landscape.
Though widely criticised, particularly by trade liberalists, these policies cannot be analysed in isolation from the broader trajectory of American industrial history and the socioeconomic imperatives now confronting the United States. Amid growing concerns about stagnation, inequality and dependency on foreign manufacturing, reindustrialisation, domestic entrepreneurship and innovation have re-emerged as political priorities. This reconfiguration of the global trade order will likely persist, with long-term effects on global value chains (GVCs). It is thus imperative for countries like Bangladesh to rethink their positioning within global value chainsÌý — adjusting both upstream and downstream engagements based on geopolitical shifts and national capacities.
The very logic of the global production network is undergoing revision. Economic efficiency and cost optimisation, once paramount, now coexist with geo-economic and strategic calculations. China, targeted most aggressively since the first wave of Trump-era trade interventions, has shown considerable agility in adapting its supply chains. Yet, not all economies are equally equipped to respond in kind.
Until 2022, China held the position of the United States’ largest import source, accounting for 21 per cent of total imports. Recognising early the redirection of American trade priorities, China strategically reduced its exposure to the US market and redirected a growing share of its exports to the global South. Presently, over half of China’s exports are absorbed by developing markets, signifying a historic shift. Meanwhile, the ‘Made in China 2025’ initiative — backed by substantial investment in domestic technology — has begun to yield tangible results. At the same time, the Belt and Road Initiative has expanded China’s infrastructural and commercial influence far beyond its borders.
Despite formidable restrictions, such as the CHIPS Act and export controls preventing Dutch firm ASML from supplying critical semiconductor technology, China has responded with robust research and development investments, an assertive expansion into artificial intelligence and nanotechnology, and a realignment of its export strategy. As a result, the US share in Chinese exports has fallen from 22 per cent to 15 per cent, demonstrating China’s evolving resilience.
Bangladesh, of course, is not China. It lacks the same technological base, resource endowment, and geopolitical leverage. Nonetheless, there are instructive lessons to be drawn from China’s response, particularly around trade diversification, technological self-sufficiency and strategic engagement with emerging markets. Bangladesh’s rise as the second-largest exporter of readymade garments owes much to its role in global value chains, especially in the labour-intensive, low-cost manufacturing segment. However, this model is now under severe strain.
Over four decades, the structural conditions of the RMG sector in Bangladesh have remained largely unchanged. The industry relies heavily on imported intermediate inputs, is overly dependent on lead firms based in developed countries, and focuses predominantly on two key export markets — the European Union and the United States. This concentration exposes the industry to significant external shocks, such as the current wave of tariff impositions. But these vulnerabilities are not new. Even before the trade war, the sector was grappling with existential challenges: political instability, loss of preferential treatment post-LDC graduation, lack of value addition and intensifying global competition.
The tariff shock has merely underscored the urgency of long-overdue reforms. A strategic recalibration is essential, starting with the diversification of sources for raw materials and intermediate inputs. Bangladesh must reduce its dependence on China and India by exploring alternative suppliers. There is untapped potential in Pakistan, the Central Asian republics and even the United States for procuring textiles and cotton. Several Central American countries, for instance, use US-grown cotton to manufacture RMG products for export back to the US, enjoying duty-free, quota-free access under trade agreements. A similar arrangement could be pursued by Bangladesh, thus embedding its exports more strategically within US supply chains and incentivising American policymakers to reconsider punitive tariff measures.
In an era where economic nationalism defines trade policy, appealing to fairness alone is insufficient. Demonstrating business value to the American economy is essential. A mere diplomatic appeal for tariff waivers will not suffice. Trade engagement must be backed by tangible economic logic.
To this end, Bangladesh’s RMG sector must also move away from its traditional dependency on low-cost, labour-intensive manufacturing. Investment in skill development, technology adoption and product upgrading is no longer optional. Public policies must create an enabling environment for the industry to climb the value ladder. Targeted incentives for research, design, and innovation, as well as improved training infrastructure, can help Bangladesh attract companies looking to relocate from China and Vietnam.
Beyond production upgrades, strategic reforms are required in trade policy. Export market diversification remains an urgent priority. Many African and South American economies have a growing demand for RMG products — demand which is currently being met indirectly through intermediaries in Dubai or Europe. Directly accessing these markets, through bilateral agreements or business-to-business initiatives, would reduce Bangladesh’s exposure to developed markets and enhance profitability.
Similarly, Bangladesh must better engage with the Gulf Cooperation Council market. At present, economic relations with Gulf states are dominated by low-skilled labour migration. Indian traders dominate RMG exports to the region. Bangladesh has yet to fully explore this potential, despite its existing cultural and religious ties to the Gulf. With strategic diplomacy and logistical investments, the Gulf Cooperation Council could become a key growth area for Bangladeshi exports.
Another critical front is economic diplomacy with neighbouring giants India and China. Bangladesh faces steep trade deficits with both, and non-tariff barriers continue to restrict market access. Negotiating the removal of such barriers, especially for RMG and other manufactured goods, could dramatically alter Bangladesh’s export dynamics. In such efforts, trade negotiation teams must include professionals with deep sectoral expertise rather than relying solely on bureaucrats.
Simultaneously, the policy community must prepare for the post-LDC transition. Graduation to lower-middle-income status brings not only reputational gain but also the erosion of trade preferences. Bangladesh should proactively negotiate phase-out periods or transitional arrangements that delay the imposition of new tariffs. Moreover, bilateral free trade agreements with major export destinations — particularly the EU and the US — must be explored. Unlike free tariff agreements with direct competitors, free tariff agreements with advanced economies are unlikely to result in market flooding. Rather, they can enhance Bangladesh’s competitiveness in sectors where it holds comparative advantage. Careful due diligence and market analysis are needed to evaluate the terms of such agreements.
If successfully negotiated, such agreements could unlock not only preferential access but also attract greater foreign direct investment in high-tech sectors. Foreign direct investment inflows, accompanied by technology transfer and management know-how, could significantly raise the productivity and value addition of Bangladesh’s RMG sector. This will be crucial as low-cost mass production becomes increasingly unviable for many competitors, including China and Vietnam, where wage and compliance costs are rising.
Importantly, competitiveness in RMG does not hinge solely on labour costs. Labour contributes merely 18–20 per cent of total production costs. Infrastructure, logistics, administrative efficiency, and financial services all play a critical role. Improvements in port operations, customs administration, banking, and regulatory institutions are therefore vital. Without such structural reforms, gains in productivity and scale will remain constrained.
In conclusion, the trade war presents both a threat and an opportunity for Bangladesh’s RMG industry. While the crisis exposes structural weaknesses, it also provides a pivotal moment to rethink the country’s place in global trade. Through investment in skills, infrastructure, technological capacity and strategic diplomacy, Bangladesh can transform external pressures into a catalyst for sustainable growth. What is required now is not just policy realignment but a national vision for industrial upgrading and global integration — one that anticipates change rather than merely reacts to it.
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Dr Muhammad Mohiuddin is a professor of management at Laval University, Quebec, Canada.
