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Bangladesh’s apparel sector enters 2026 amid renewed global trade realignments that are reshaping sourcing decisions and order flows across key export markets. Recent bilateral trade deals, tariff recalibrations, and demand-side pressures, particularly in the United States are creating a more competitive and uncertain operating environment for apparel exporters.
Compounding this, Bangladesh’s position in the European Union, the largest export market, faces deepening price erosion. Unit prices for Bangladeshi apparel declined 3.84% in 2025 relative to the previous year, reflecting a broader market-wide trend. According to Eurostat data analysed by the Bangladesh Apparel Exchange, total EU apparel imports expanded 2.10% to €90 billion, propelled by a 13.78% surge in import volumes, even as average unit prices contracted by over 10.27%. Bangladesh’s export value to the EU grew from €18.32 billion to €19.41 billion, a 6% rise, yet this headline figure masks an underlying weakness, as volume growth consistently outran value growth throughout the year, culminating in a 12% year-on-year fall in unit prices in December alone.1
Among the key competitors, China’s apparel exports to the EU rose 1.17% in value to €26.58 billion despite a 9.38% fall in unit prices, as exporters redirected shipments away from the US market following elevated tariff barriers there. India, with its growing presence in the EU, is expected to further consolidate its position as it advances its Free Trade Agreement negotiations with the EU. 2 Vietnam stands out as the outlier, with EU exports rising 10% alongside a 4.51% unit price increase.3 This divergence highlights the urgency of Bangladesh securing comparable preferential access before its LDC transition.
Since August 2025, Bangladeshi apparel exports to the US have faced an additional 20 percent duty, taking the effective tariff burden to around 35 percent. Exporters report that elevated tariffs have dampened consumer demand in the US market, prompting buyers to cut order volumes by 10–20 percent.
In November 2025, Bangladesh’s US exports declined by 14.5% year-on-year in value and nearly 11% in volume.4 It is important to note that the strong cumulative growth earlier in 2025 was partly the result of front-loading as buyers advanced shipments to avoid anticipated higher tariffs, which inflated the earlier baseline and makes the recent decline appear sharper in comparison.
A significant legal development occurred when the US Supreme Court struck down President Trump’s broad global tariffs imposed under emergency economic powers (IEEPA), reducing the average effective tariff rate from 16.9% to approximately 9.1%, still the highest level since 1946 outside of 2025. However, uncertainty persists.
President Trump has pledged to introduce a new 10% tariff under Section 122 of the Trade Act of 1974 as a temporary measure and signalled further investigations under Section 301 to establish more durable duties. Analysts describe this as opening “a new chapter” in US tariff policy marked by continued volatility, legal disputes, and a prolonged battle over refunds of the $133.5 billion collected under the invalidated tariffs.5
At the bilateral level, Bangladesh and the United States signed the Agreement on Reciprocal Trade on February 9, 2026, bringing the reciprocal duty on Bangladeshi exports down from 20% to 19% alongside duty-free or preferential access for approximately 2,500 Bangladeshi products.
However, the deal extends well beyond standard tariff relief. Bangladesh has committed to purchasing $15 billion worth of US energy commodities over 15 years, at least $3.5 billion in US agricultural products, and 14 Boeing aircraft for Biman Bangladesh Airlines, while also accepting significant geopolitical provisions including restrictions on procurement from certain countries and labour reforms that bring Export Processing Zones under general labour law within two years. Economists have raised pointed concerns about the agreement’s asymmetry, arguing that a single percentage point tariff reduction is a steep price for the breadth of obligations assumed.6
Looking ahead, competitive pressures in the European market are expected to intensify further. As Bangladesh approaches LDC graduation and the eventual phase-out of duty-free GSP access by 2029, competitors such as India and Vietnam are actively pursuing or have concluded free trade agreements with the EU. Duty-free access for competitors, combined with potential tariffs of up to 12 percent for Bangladesh post-transition, could significantly alter sourcing dynamics in one of the country’s most critical markets, accounting for nearly half of Bangladesh’s total apparel exports.
Moreover, in this increasingly price and compliance-sensitive trade environment, competitiveness is no longer determined by scale alone. Energy costs, carbon intensity, and environmental performance are becoming critical factors in buyer sourcing decisions, especially as carbon border measures and sustainability-linked procurement gain traction in the EU market.
It was within this context that Bunon 2030 convened a closed-door diagnostic session on January 8, 2026, focused on how renewable energy can support the decarbonization and long-term competitiveness of Bangladesh’s apparel sector. Organized by LightCastle Partners under the Oporajita Collective Impact Initiative, the session brought together academicians, industry leaders, financiers, policymakers, and sustainability practitioners, including representatives from IDCOL, SREDA, BSREA, Bangladesh Bank, BGMEA, GIZ, The Asia Foundation, PRAN-RFL Group, Team Asia, and the ESTex Foundation, for a candid, solution- oriented discussion.
The dialogue highlighted that while technologies such as rooftop solar, energy efficient machinery, and corporate power purchase agreements are increasingly viable, adoption remains constrained by policy misalignment, financing gaps, and regulatory uncertainty. Participants emphasized that accelerating renewable energy uptake is not only a climate imperative, but a strategic response to mounting trade and tariff pressures, one that can help protect margins, meet buyer expectations, and sustain export growth.
Building on the momentum from January’s renewable energy session, Bunon 2030 will convene its next closed-door diagnostic focused on enhancing competitiveness through circular practices and access to finance for the RMG sector. As Bangladesh’s apparel industry faces simultaneous pressure on margins, market access, and sustainability compliance, circular business models and innovative financing instruments have emerged as dual levers for resilience and long-term competitiveness. We invite industry leaders, financiers, policymakers, and sustainability practitioners to join us for a candid, solution-oriented dialogue. If you would like to participate or nominate a representative from your organisation, please reach out to the Bunon 2030 team. Space is limited and participation is by invitation only.
Against this backdrop, Bunon 2030 continues to serve as a platform for examining how trade policy, sustainability, and industrial competitiveness intersect. By grounding dialogue in evidence and engaging stakeholders across the value chain, the initiative aims to support a future where Bangladesh’s RMG sector remains resilient amid global uncertainty.
[1] The Business Standard. (2026, February 14). Bangladesh apparel prices drop nearly 4% in EU amid weak demand, rival push.
[4] The Daily Star. (2026, February 22). What’s next after US Supreme Court tariff ruling?
[5] The Daily Star. (2026, February 11). US tariff cut comes at steep cost.
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