Trump’s Tariff War: Why Vietnam Offers Zero Tariffs to the US, and What’s at Stake for Bangladesh

Image: Why Vietnam Offers Concessions to Counter Trump’s Tariffs

Which countries suffer the most from trade wars? In one word: export-dependent nations. China foresaw this scenario long ago and has been focusing on boosting domestic consumption for over a decade. In this context, Bangladesh is somewhat advantageously positioned. In terms of the share of goods and commercial services exports in GDP, Bangladesh ranks low among least developed countries (LDCs), holding the 30th position. Since 2010, it has only moved up one spot.

According to the *World Trade Statistical Review*, Bangladesh’s export-to-GDP ratio in 2022 was 12.5%. Despite economic growth, this ratio has declined since 2010. While commercial services exports rose from 0.9% to 1.2% of GDP, goods exports dropped from 13.9% to 11.3%.

On 9 July 2025, the truce in Trump’s tariff war was set to expire. Only three countries secured structural agreements with the US; Bangladesh was not among them. Consequently, on Monday, Bangladesh was one of the countries notified by Trump of a revised 35% tariff rate, sparking discussions about its implications. Comparisons are being drawn with Vietnam, which successfully negotiated an agreement. Vietnam’s annual exports exceed $400 billion, with $110 billion (30% of its total exports) going to the US. In contrast, Bangladesh exports $48 billion annually, with only $8 billion (17% of total exports) to the US. The US market is critical for Vietnam, prompting it to allow US goods tariff-free access in exchange for a 20% US tariff on Vietnamese products. Bangladesh’s economic structure doesn’t align fully with Vietnam’s, though a drop in exports would undoubtedly impact its economy. Per the *World Trade Statistical Review*, Vietnam’s export-to-GDP ratio is nearly 90%, making exports a cornerstone of its economy. For Bangladesh, exports are less critical, with imports and the service sector playing larger roles. However, Bangladesh’s service exports lag behind more advanced economies. Economically, Vietnam’s urgency to secure a deal was greater than Bangladesh’s. Vietnam acted proactively, while Bangladesh’s diplomatic efforts intensified only after 2 April 2025, indicating a lag in strategic engagement. Exports are vital for developing economies, but their ideal contribution varies based on economic structure, production capacity, foreign exchange needs, and diversification. Vietnam’s export-driven model, like those of South Korea, China, and Malaysia, has fueled rapid growth. Post-World War II, such models drove industrialization and poverty reduction in countries like South Korea, Singapore, China, and Vietnam. However, over-reliance on foreign markets exposes economies to global downturns, as seen in China’s job losses during the 2008 financial crisis. While export-led growth is effective, it requires diversification, technological innovation, domestic market development, and commitments to labor rights and environmental sustainability to remain sustainable. **What China Did** Post-2008, China shifted its economic strategy toward domestic consumption and middle-class purchasing power, adopting a “dual circulation” policy. This balances exports and foreign investment with domestic demand, consumption, and technology. Key drivers include global market uncertainties, a rising middle class (over 400 million), technological advancements (e.g., Huawei, Alibaba), and efforts to reduce regional disparities. Challenges remain, including boosting household income and social security to counter China’s savings-prone culture. **Bangladesh’s Path Forward**

Bangladesh’s exports, heavily reliant on garments, lack diversification. Other sectors, like leather goods, have potential but face quality issues. Domestic market growth has reduced the urgency for export-oriented development, stunting quality improvements. Dhaka University economics professor Selim Raihan emphasizes that export-led growth is crucial for developing nations like Bangladesh, given limited domestic market size and consumer purchasing power. Exports enable economies of scale and income growth, with the garment sector driving employment and foreign exchange earnings. However, over-reliance on a single sector is risky amid global instability, trade wars, or pandemics. A balanced approach—diversifying exports while strengthening local production, entrepreneurship, and domestic demand—is recommended.