Authored By:Samanta Azrin Prapty
LL.M Specialized in International Commercial Law (North South University)
Introduction
The world of trade has undergone shifts a lot in the past several years, especially for Least Developed Countries (LDCs) like Bangladesh. Bangladesh is about to graduate from being a least developed country (LDC) in 2026, which is both an opportunity and an imminent challenge. The probability of shedding favorable trade conditions, primarily from the EU and the US, introduces new factors that might harm its strong export-oriented economy, especially in the readymade garment (RMG) industry. The United States’ policy of reciprocal tariffs renders things much more challenging. It raises duties on goods that originate from nations with rising economies, like Bangladesh, which could undo years of progress in trade relations. This issue is quite significant at the moment considering Bangladesh’s economy depends on its trade advantages, many of which are likely to be hurt by the simultaneous pressures of LDC graduation and punitive tariffs. The current trade framework, which has kept Bangladesh safe as an LDC, is being glanced at again. The changes that are about to happen will have long-term effects on the country’s foreign trade policy and relationships with other countries. Bangladesh historically relied on the Generalized System of Preferences (GSP), however global trade standards are changing and
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moving toward a more fair and reciprocal approach. Bangladesh is having a hard time staying competitive in global markets as these favored arrangements slowly fade away.
Contemporary circumstances and Characteristics of the Sachem Bangladesh’s readymade garment (RMG) exports and larger manufacturing base have depended on major markets giving it LDC status, which means it may export goods without paying duties or quotas. For instance, the World Trade Organization (WTO) assessment on the effects of LDC graduation on trade asserts that Bangladesh is at an extremely elevated risk of losing its trade preferences shortly after graduation.1 Within identical period, the U.S. has indicated that it will increase taxes on Bangladeshi experts by 35–37% starting in 2025, which might cause significant challenges for exports.2 Bangladesh is progressing through a “Double transition” owing to these two things: decreasing priority after graduation and bringing to impose punitive duties in a significant export market.3 One policy brief contends that Bangladesh’s clothing industry is going to forfeit revenue on exports if both reciprocal tariff exposure and LDC graduation unfold at the same time.
Structural Deficiencies in Bangladesh’s Preparedness
Several flaws in Bangladesh’s trade policy and institutional framework generate the situation even more dire. Too much dependence on special access, Research indicates that about three-quarters of Bangladesh’s exports are enhanced by LDC-specific trade
1 World Trade Organization Secretariat & EIF, Trade Impacts of LDC Graduation (May 2020), https://www.wto.org/english/res_e/booksp_e/trade_impacts_of_ldc_graduation.pdf.
2 Selim Raihan, Trump’s “Reciprocal Tariff” and Risks for Bangladesh, Prothom Alo (Feb. 22, 2025), https://en.prothomalo.com/opinion/op-ed/r2yentjxxc.
3 Mohammad Abdur Razzaque, Syful Islam & Rakin Uz Zaman, U.S. Reciprocal Tariffs: Implications for Bangladesh (RAPID Policy Brief Oct. 2025),
https://www.rapidbd.org/wp-content/uploads/2025/09/RAPID-Policy-Brief_October-2025_U.S.-Recipro cal-Tariffs-Implications-for-Bangladesh-1.pdf.
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preferences , a much greater proportion compared to other LDCs.4 This demonstrates that they weren’t able to maintain their exports competitive without preferences. Lack of diverse export markets and products, since the garment sector provides up in excess of 80 percent of exports, any tariff shock in that sector possesses a greater impact on
overall export performance.5 Not particularly adept at negotiating and lobbying,The Business Standard states that the Bangladeshi government didn’t include private-sector voices and lobbyists into its negotiations with the U.S., which hurt its bargaining position. Not enough planning for institutional transitions, Bangladesh has set up committees to make the “smooth transition,” but research demonstrates that there remain problems with making SMEs more competitive, improving value chains, and getting ready for the end of LDC support measures.6 Being open to changes in policies from outside,The U.S. has a reciprocal tariff system that doesn’t take into account LDC designation. Bangladesh’s belief that it will get special treatment because it is an LDC seems amiss.
Legal Interpretation: International Law, Treaties, and Case Citations LDCs obtain special and distinct treatment (SDT) under the WTO. As an instance, Article 11 of the General Agreement on Tariffs and Trade (GATT) signifies LDCs “shall be required only to undertake commitments to the extent consistent with their individual development situation”.7 Subsequent to graduation, such exceptional
4 T. T. Duong et al., Report on Strategic Approaches to FTAs: BGD-LDC Graduation (RAPID Sept. 2025),
https://www.rapidbd.org/wp-content/uploads/2025/09/Report-on-Strategic-approaches-to-FTA_BGD-L DC-Graduation.pdf.
5 Bangladesh Institute of International and Strategic Studies, Bangladesh After LDC Graduation: Preparedness & Policy Options (2025),
https://www.biiss.org/article/bangladesh-after-ldc-graduation-preparedness-policy-options.
6 Shahidur Rahman, Why Bangladesh’s Talks with the U.S. Were Unsuccessful, The Business Standard (Jan. 2025),
https://www.tbsnews.net/bangladesh/why-bangladeshs-talks-us-were-unsuccessful-1183446#.
7 World Trade Organization Secretariat, GATT 1994Article XI: Quantitative Restrictions, WTO Legal Texts (2019), https://www.wto.org/english/res_e/publications_e/ai17_e/gatt1994_art11_gatt47.pdf.
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flexibilities cease to exist. Consequently, Bangladesh must start earning rights as a “developing country” and be treated normally (MFN) by its partners. The U.S. system of reciprocal tariffs raises concerns about obligations not to discriminate. The U.S. is not required to provide unilateral advantages by treaty; but, the arbitrary application of elevated tariffs may contravene the WTO’s most-favoured-nation (MFN) principle (GATT Article I).8 The reciprocal tariff is, however, primarily an act of unilateral U.S. national law, arguably beyond the purview of WTO adjudication. The WTO’s “Trade impacts of LDC Graduation ” report affirms that LDCs who graduate may have to pay higher tariffs and lose some of their flexibility with rules of origin. Accordingly, legally, Bangladesh’s claim to special tariff-free access is not assured after graduation, and the US duties, while punitive, are not per se illegal under WTO law (since the US has a lot of freedom under its own legislation).9 Bangladesh’s misunderstanding of LDC designation as providing perpetual protection indicates a legal deficiency in both doctrine and diplomacy.
Comprehensive Debate of Consequences for Bangladesh
The combined shock of U.S. reciprocal tariffs and LDC graduation has many important effects, Declining export competitiveness, Bangladesh’s ability to compete on pricing in important markets would get worse as it loses duty-free access and has to pay high U.S. tariffs. The ex-ante estimate, for instance, says that Bangladesh’s exports could drop by more than 14% since tariffs will be up after graduation. Risk of concentration in a sector, RMG is the biggest export, therefore any bad change (such a tariff, rules of origin, or customer moving) will affect jobs, remittances, and growth in general. The Financial Express indicates that Bangladesh’s RMG exports to the U.S. constitute a large part of its economy and are in danger.10 Trade diplomacy is at a
8 World Trade Organization Secretariat, GATT 1994Article I: Most-Favored-Nation Treatment, WTO Legal Texts (2019), https://www.wto.org/english/res_e/publications_e/ai17_e/gatt1994_art1_oth.pdf.
9 Id. (referencing LDC Graduation: A Summary of Key Issues, WTO Publications) (2025), https://www.wto.org/english/res_e/publications_e/ldc_graduation_e.htm.
10 Razzaque et al., Bangladesh’s Response to LDC Graduation: Strategic Policy Options (Int’l Growth Centre, Sept. 2023),
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disadvantage since Bangladesh has a bad track record when it arrives at negotiating with the U.S. This shows that the country is not ready to negotiate complicated bilateral accords that require pledges on labor standards, intellectual property rights, investment, and regulatory alignment. Loss of policy space and concessional support, Graduation also implies that LDCs will cease to receive concessional funds and technical help, which will put more pressure on them to make changes at home as external support disappears.11 Disadvantages compared to competition, Vietnam and India, two of Bangladesh’s biggest competitors in exporting, are signing bilateral FTAs and becoming more integrated. Bangladesh, on the other hand, is still locked in a model that relies on preferences. At the precise moment of exposure, this puts Bangladesh at a structural disadvantage. Bangladesh is in a bad situation because it is facing two big problems at once, higher tariffs from outside the country (especially from the U.S.) and losing LDC privileges from inside the country.12 The country’s current stance reactive instead of strategic makes the risk of export contraction, investment loss, job loss, and growth slowdown even worse.
Exemptions and Possible Advantages
Despite the fact the situation is tense, there are possible benefits and strategic opportunities. The likelihood to improve the structure,Graduation necessitates a transition from low-cost, labor-intensive exports to higher value-added, differentiated products.Bangladesh needs to diversify into non-apparel products and enhance domestic value chains. Leverage for negotiating new FTAs, Bangladesh can turn its graduation into a “development leap” instead of a setback by actively negotiating FTAs or market access agreements, such as GSP+ in the EU or bilateral arrangements with Japan, Canada, and other countries. Motivation for alterations to institutions and
https://www.theigc.org/sites/default/files/2025-04/Razzaque-et-al-Final%20Report-September-2023.pdf.
11 Salehuddin Ahmed, How Dicey Is the Trump Tariff Deal?, The Financial Express (Jan. 2025), https://thefinancialexpress.com.bd/views/columns/how-dicey-is-the-trump-tariff-deal.
12 Id. at 11.
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productivity, The counter-factual shock drives reforms in governance, logistics, compliance, and sustainability; this may render the company more competitive in the long run. However, these “benefits” depend on strong leadership, bold policymaking, and institutional investment. They fail to achieve up for the immediate risk of losing access to markets and becoming vulnerable to tariffs.13
Options and Strategic Recommendations
Bangladesh requires to initiate quick action on the recommendations that follow to get through this risky change: Expanding into new markets and improving products, Stop relying too much on the U.S. and EU clothing markets. Look into East Asia, Africa, and Latin America. Also, work on exporting things other than clothes. Negotiating exports and trade diplomacy, Take part in both bilateral and plurilateral FTAs, work toward GSP+ status with the EU, improve your ability to negotiate trade deals, and fully involve the business sector (including exporters and lobbyists). Strengthening value chains and compliance at home, To lower cost-sensitivity and improve competitiveness, put money into backward connections (such making yarn and fabric), automation, design innovation, and sustainability credentials. How ready institutions are for graduation, Include the “smooth transition” strategy into action with strict oversight, training for small and medium-sized businesses, and making sure that domestic laws are in line with global norms for labor, the environment, and intellectual property. Risk protection for businesses, Set up export refinancing,
13 Bangladesh Institute of International and Strategic Studies, Bangladesh After LDC Graduation: Preparedness & Policy Options (2025),
https://www.biiss.org/article/bangladesh-after-ldc-graduation-preparedness-policy-options.
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tailored credit lines, and insurance tools for businesses who are likely to be hit hard by tariff shocks. One policy brief says that this kind of cushioning should happen right away. Scenario planning based on data, Use detailed HS code export-tariff elasticity research (for example, Razzaque et al.. indicate that the own-price elasticities of Bangladesh’s clothing are approximately –0.35 to –0.4 in Europe) to find the product groups that are most at risk.14
Conclusion
In this regard, Bangladesh is at a crossroads. Its graduation from the United Nations list of Least Developed Countries (LDCs) is occurring at precisely the same time that the U.S. is putting in place reciprocal tariffs. This is creating a complicated economic problem that needs quick and clear policy responses. The loss of preferential trade access and the imposition of punitive tariffs by a major trading partner including the United States mark a significant shift from the economic models that have supported Bangladesh’s growth, especially in its biggest export sector, readymade garments (RMG). This two-pronged issues demonstrates the way Bangladesh’s overreliance on just a handful of markets and products makes it vulnerable to the unpredictable forces of global trade. Bangladesh’s economic policy demands adjustments considering trade relations are about to change. To get through this rough patch, Bangladesh needs to prevent using reactive economic policies and begin to employ proactive ones for trade diversification and industrial upgrading. This means that that it requires to add more products to its export portfolio, improve value-added output in industries like electronics, medicines, and information technology, and build closer links with growing economies and regional powerhouses. The recent rise in trade wars and tariffs, especially the U.S.’s use of reciprocal tariffs, is a clear sign that international trade is no longer based only on the idea of comparative advantage. Instead, it is
14 Razzaque et al., Can Bangladesh Absorb LDC Graduation-Induced Tariff Hikes? Evidence Using Product-Level Data (Int’l Growth Centre, Dec. 2024),
https://www.theigc.org/publications/can-bangladesh-absorb-ldc-graduation-induced-tariff-hikes-eviden ce-using-product.
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becoming more influenced by geopolitical and protectionist factors. Additionally, the legal frameworks that support global trade agreements need to be gazed at more closely to see how they are changing the situation for LDCs that are graduating. International law, especially the WTO’s special and differentiated treatment rules, will need to be executed well, since if these preferential systems break down, it could have serious effects on Bangladesh’s economic sovereignty. Because of this, diplomatic negotiation is an important instrument for Bangladesh, not only to get good trade accords but also to protect its economic interests in a world beyond LDC. Bangladesh’s diplomatic involvement with significant global actors, especially through the negotiation of Free Trade Agreements (FTAs) and the pursuit of improved market access mechanisms, should be regarded as essential for its survival in the contemporary global economic landscape. The most recent data and policy studies show that Bangladesh’s economy will only be able to stay strong after graduation if it can improve its institutions, adjust to changes in global commerce, and make strong structural changes. It’s clear that LDC graduation and U.S. tariffs will be hard on Bangladesh, but they also give the country a chance to change its economic model and become a more competitive, diverse, and self-sufficient economy. In conclusion, Bangladesh’s future will depend on how well it can turn difficulties into chances. The upcoming shift necessitates an immediate reassessment of its trade policies, legal structures, and diplomatic stance, all of which must be congruent with the demands of a rapidly shifting global economy. The stakes are great, but Bangladesh may overcome the current shortcomings and become economically strong in the post-LDC future if it plans ahead, makes smart decisions, and gets involved with other countries.
Bibliography
Reports
- World Trade Organization Secretariat & EIF, Trade Impacts of LDC Graduation (May 2020),
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https://www.wto.org/english/res_e/booksp_e/trade_impacts_of_ldc_graduation.pdf. •T. T. Duong et al., Report on Strategic Approaches to FTAs: BGD-LDC Graduation (RAPID Sept. 2025),
https://www.rapidbd.org/wp-content/uploads/2025/09/Report-on-Strategic-approaches to-FTA_BGD-LDC-Graduation.pdf.
- Mohammad Abdur Razzaque, Syful Islam & Rakin Uz Zaman, U.S. Reciprocal Tariffs: Implications for Bangladesh (RAPID Policy Brief Oct. 2025), https://www.rapidbd.org/wp-content/uploads/2025/09/RAPID-Policy-Brief_October-2 025_U.S.-Reciprocal-Tariffs-Implications-for-Bangladesh-1.pdf.
- Bangladesh Institute of International and Strategic Studies, Bangladesh After LDC Graduation: Preparedness & Policy Options (2025),
https://www.biiss.org/article/bangladesh-after-ldc-graduation-preparedness-policy-opt ions.
- Razzaque et al., Bangladesh’s Response to LDC Graduation: Strategic Policy Options (Int’l Growth Centre, Sept. 2023),
https://www.theigc.org/sites/default/files/2025-04/Razzaque-et-al-Final%20Report-Sep tember-2023.pdf.
- Razzaque et al., Can Bangladesh Absorb LDC Graduation-Induced Tariff Hikes? Evidence Using Product-Level Data (Int’l Growth Centre, Dec. 2024), https://www.theigc.org/publications/can-bangladesh-absorb-ldc-graduation-induced-ta riff-hikes-evidence-using-product.
Primary Sources
- World Trade Organization Secretariat, GATT 1994Article I: Most-Favored-Nation Treatment, WTO Legal Texts (2019),
https://www.wto.org/english/res_e/publications_e/ai17_e/gatt1994_art1_oth.pdf. •World Trade Organization Secretariat, GATT 1994Article XI: Quantitative Restrictions, WTO Legal Texts (2019),
https://www.wto.org/english/res_e/publications_e/ai17_e/gatt1994_art11_gatt47.pdf. •World Trade Organization Secretariat, LDC Graduation: A Summary of Key Issues,
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WTO Publications (2025),
https://www.wto.org/english/res_e/publications_e/ldc_graduation_e.htm.
Secondary Sources
- Salehuddin Ahmed, How Dicey Is the Trump Tariff Deal?, The Financial Express (Jan. 2025),
https://thefinancialexpress.com.bd/views/columns/how-dicey-is-the-trump-tariff-deal. •Shahidur Rahman, Why Bangladesh’s Talks with the U.S. Were Unsuccessful, The Business Standard (Jan. 2025),
https://www.tbsnews.net/bangladesh/why-bangladeshs-talks-us-were-unsuccessful-11 83446 – .
- Selim Raihan, Trump’s “Reciprocal Tariff” and Risks for Bangladesh, Prothom Alo (Feb. 22, 2025),
http:// https://en.prothomalo.com/opinion/op-ed/r2yentjxxc.
News
- Salehuddin Ahmed, How Dicey Is the Trump Tariff Deal?, The Financial Express (Jan. 2025),
https://thefinancialexpress.com.bd/views/columns/how-dicey-is-the-trump-tariff-deal. •Shahidur Rahman, Why Bangladesh’s Talks with the U.S. Were Unsuccessful, The Business Standard (Jan. 2025),
https://www.tbsnews.net/bangladesh/why-bangladeshs-talks-us-were-unsuccessful-11 83446 – .
- Selim Raihan, Trump’s “Reciprocal Tariff” and Risks for Bangladesh, Prothom Alo (Feb. 22, 2025), https://en.prothomalo.com/opinion/op-ed/r2yentjxxc.
Table of Legislation
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- World Trade Organization Secretariat, GATT 1994Article I: Most-Favored-Nation Treatment, WTO Legal Texts (2019),
https://www.wto.org/english/res_e/publications_e/ai17_e/gatt1994_art1_oth.pdf. •World Trade Organization Secretariat, GATT 1994Article XI: Quantitative Restrictions, WTO Legal Texts (2019),
https://www.wto.org/english/res_e/publications_e/ai17_e/gatt1994_art11_gatt47.pdf. 1)
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