Bangladeshi US retailers lean on suppliers to bear portion of tariffs

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Clothing brands and retailers in the United States are pressing their Bangladeshi suppliers to absorb a portion of new tariffs levied by the US, squeezing the already thin margins of garment exporters.

The new tariffs, effective from Aug 7, come on top of existing duties, creating a complex and costly environment for exporters and importers. For many common apparel items, the effective tariff rate will now surge to 36.5 percent, combining the new 20 percent levy with an existing 16.5 percent duty.

US President Donald Trump's tariff regime has triggered a behind-the-scenes struggle over who will ultimately bear the financial burden. Rather than absorbing the cost or immediately passing it on to consumers, many US apparel retailers and brands have turned to their suppliers in Bangladesh, demanding they share the pain.

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This pressure campaign, unfolding in private negotiations, has placed Bangladeshi exporters in a tight spot, Bangladeshi newspaper The Daily Star said.

The requests from US buyers are not subtle. Across the industry, Bangladeshi garment manufacturers are systematically asked to absorb a portion of the new tariff costs by reducing their prices, according to several leading exporters. Some retailers asked for adjustments equivalent to a quarter of the new cost.

This move mirrors the strategy employed by buyers when a preliminary 10 percent baseline tariff was introduced on April 9. That levy, now replaced by the new 20 percent rate, also saw retailers successfully push suppliers to share the cost.

"We have little to say and many of us have been accepting the buyers' demand, although the profit is squeezed to 3 to 4 percent. We are against the wall," said Abdul Kader Azad, chairman of Ha-Meem Group, a major apparel supplier to the US. He said some buyers are demanding both a share of the tariff cost and a general price reduction.

Eroding profitability

The situation places exporters in a precarious position, forcing them to choose between eroding their profitability and risking long-term business relationships. "My buyers are requesting me to bear up to 5 percentage points of the additional tariff," said Sharif Zahir, managing director of Ananta Group. "I also responded to the buyers' call as we have long-term business relations."

The impact varies by product. For woven shirts, for example, the existing tariff was 19.5 percent. The previous 10 percent baseline tariff pushed the total to 29.5 percent. With the new 20 percent reciprocal tariff, the rate will now stand at 39.5 percent, according to The Daily Star.

Ramzul Seraj, managing director of Elite Garments, said he had already been absorbing a portion of the initial baseline tariff. His buyers have not asked him to shoulder more.

However, some retailers are also adjusting prices for the end consumers to offset the higher import costs. Seraj said a higher-end woven shirt his factory sells for $10, which previously retailed for $65 in the US, is now being marked up to $70. He said that buyers may slightly increase the price they pay him to compensate.

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The pressure from retailers appears to be a temporary measure for some, designed to bridge the gap until the new costs can be fully integrated into their pricing models. Shovon Islam, managing director of Sparrow Group, said his buyers have asked him to share a portion of the additional tariff until the next summer season, ending around February 2026.

Despite the squeeze on margins, exporters are reporting a positive development: work orders, which had been pending amid uncertainty over the final tariff rate, are now flowing back. "The buyers are taking all the pending work orders after the announcement of the new tariff rate," said Zahir.

Officially, the industry's main body is yet to register the trend. Mahmud Hasan Khan, president of the Bangladesh Garment Manufacturers and Exporters Association, said that no exporters had formally complained to him about the cost-sharing requests and that he was not otherwise aware of the issue. This suggests these negotiations are happening on a direct, buyer-to-supplier basis as companies navigate the fallout from the new trade policy.