Uncertainty over the garment industry has deepened as Bangladesh's inconclusive trade talks in Washington stand in stark contrast to favourable deals for its regional rivals.

Bloomberg News reported that the US is working toward an agreement with India that could reduce its proposed tariffs to below 20 percent, while Vietnam has secured an early, favourable deal.

Bangladesh needs to improve efficiency by reducing the cost of doing business to be more competitive.
    — Masrur Reaz, chairman, Policy Exchange

The diverging outcomes threaten to create a multi-tiered tariff landscape in Asia, placing nations like Bangladesh at a serious disadvantage in the US market. The uncertainty is already rippling through the supply chain, with US retailers pausing orders from Bangladesh ahead of the peak Christmas season.

The impasse for Dhaka centres on two key US demands: a 35 percent tariff set to take effect on August 1, and a difficult 40 percent local value-addition requirement for goods to qualify as "Made in Bangladesh". The latter is a major challenge for the woven sector, which imports over 70 percent of its fabric from China.

"Work orders have been put on hold by buyers," said Ramzul Seraj, managing director of Elite Garments Ltd, an exporter to the US.

A Reuters report on Friday revealed that suppliers to Walmart have also delayed or suspended some orders with garment manufacturers in Bangladesh.

This contrasts with the situation for its competitors. On July 2, President Donald Trump announced a 20 percent tariff rate for Vietnam, the primary rival in global garment trade. Now, India appears poised to do even better. If finalised, Bloomberg reported, the arrangement would place India on a short list of trading partners that have secured preferential deals with the Trump administration, which has shocked other nations with higher tariffs.

The developments are compounding existing economic anxieties. Faruque Hassan, managing director of the Giant Group, warned of a slowdown in US consumer spending due to high inflation. "It will ultimately impact Bangladeshi exports to the US," he said.

Despite the headwinds, industry leaders in Dhaka are projecting cautious optimism. Mahmud Hasan Khan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said he is "very much hopeful that a level playing field of tariff will be ensured," citing the "positive discussion" that took place.

Khan indicated that the BGMEA will sit with the government upon the return of Commerce Adviser Sk Bashir Uddin, who led the delegation in Washington, to determine the industry's next steps. "Bangladesh has the capacity to cater to the work orders," Khan said, suggesting that while business may decrease, there is "no reason to panic."

Industry analysts and business leaders argue that Bangladesh is caught in a difficult position: it's facing a trade issue and geopolitical pressure from Washington.

According to Masrur Reaz, chairman of the think tank Policy Exchange, the conditions set by the US Trade Representative are exceptionally difficult to fulfil. He contends that while Bangladesh focused on the commercial aspects of the tariff issue, the negotiations are influenced by a broader US policy to reduce reliance on Chinese raw materials in the global value chain.

"Even if the Trump administration lowers the tariff for Bangladesh, the rate may not be significantly lower than Vietnam, India, and Pakistan," Reaz said. He suggested a "market-based solution," such as sharing the tariff burden among fabric suppliers, manufacturers, and retailers. In the long term, he added, "Bangladesh needs to improve efficiency by reducing the cost of doing business to be more competitive."

Mostafa Abid Khan, a former member of the Bangladesh Trade and Tariff Commission, described the situation as a "double bind," where it is nearly impossible for Dhaka to accept all of the US conditions, yet the threatened 35 percent tariff would be devastating for exports.

"The buyers are already suspending work orders," said Shams Mahmud, managing director of Shasha Denims. He highlighted the immediate financial risk for local suppliers, who fear being left with raw materials purchased through back-to-back letters of credit if orders are cancelled.

Faisal Samad, managing director of Surma Garments, calculated the direct impact, saying business costs would increase by at least 27 percent if the tariffs are not lowered, making it impossible to operate profitably. While negotiations are not over, he said buyers are already demanding greater value addition for future business.

For many, the goal is simply to achieve competitive parity. "If the tariff for Bangladesh is fixed at the level of India, Vietnam, and Pakistan," Mahmud said, "then it would be a win-win situation."