After LDC graduation, price cuts—not productivity—may bear much of the burden.
Bangladesh’s garment exporters are likely to absorb as much as 40% of future EU tariff costs after 2029, largely by lowering prices to defend market share, according to a new study by Research and Development Integration for Development (RAPID). The finding underlines how exposed the country’s export-led growth model remains as preferential trade benefits expire.
Bangladesh will graduate from least developed country (LDC) status in 2026, with EU duty-free access extended until 2029. Thereafter, tariffs on apparel could rise to around 12% under existing EU rules unless a new trade arrangement—such as a free-trade agreement—is secured. RAPID’s analysis suggests exporters will be unable to pass on the full cost to buyers. Roughly 60% would be reflected in higher prices, but the remaining 40% would need to be absorbed by suppliers operating on already thin margins.
The study highlights Bangladesh’s limited pricing power. The average weighted price of its top ten apparel exports is about 36% lower than comparable products from China and Vietnam, around 25% lower than India’s, and 15% below Cambodia’s. That discount has been a competitive advantage—but also a constraint. With around half of Bangladesh’s exports destined for the EU, even small tariff changes have outsized effects.
Vulnerability is uneven across the sector. Woven garments are more exposed than knitwear, reflecting heavier dependence on imported fabrics and weaker backward linkages. Beyond tariffs, non-tariff barriers loom larger. Labour standards, human-rights scrutiny and ESG compliance are likely to shape market access as much as customs duties, warned trade experts at the study’s presentation at the University of Dhaka.
RAPID’s prescription is familiar but urgent: deeper diplomatic engagement with the EU, investment in domestic supply chains, firm-level support to preserve viability, and a strategic move up the value chain. Without that shift, Bangladesh risks competing ever harder on price—just as the rules of the game are changing.
