One might be forgiven for thinking that the turbulence unleashed by Donald Trump's trade policies during his first term as president of the United States was overhyped—especially since Bangladesh's export contraction between July 2019 and February 2020, in the aftermath of the US-China trade war that saw tariffs imposed on some $550 billion of Chinese goods and $185 billion of US goods, was soon eclipsed by the unparalleled economic disruptions brought about by the Covid pandemic. Yet, Trump 2.0 could herald a history-repeating moment akin to the 1930 Smoot-Hawley Tariff Act, which raised US import tariffs on approximately 900 products from an average of 38 percent to over 60 percent, provoking retaliation from more than 25 trading partners, crippling global trade, and deepening the recession in global economies.

As proposed, President Trump's second term may witness US tariffs escalating to an unprecedented 60 percent on imports from China—a country with which the US has maintained a bilateral trade volume exceeding $700 billion—an action that will undoubtedly reshape their economic relations, disrupt global supply chains, and inflate manufacturing costs worldwide. Furthermore, the administration's plans include imposing tariffs of 25 percent on imports from Canada and Mexico, the United States' closest trading partners, alongside a sweeping 10 to 20 percent uniform tariff on imports from all other nations, signalling a comprehensive departure from the norms of liberalised trade. Such an unparalleled escalation in tariffs will reverberate across the global economy, igniting trade conflicts, destabilising markets, and compelling nations to reassess long-standing trade alliances in an era where China's rise challenges US supremacy, triggering an intensification of economic nationalism as a response.

GLOBAL TURMOIL: WIDER RAMIFICATIONS FOR BANGLADESH

Beyond tariffs, the weakening of multilateralism, exacerbated by President Trump's focus on bilateralism and criticism of the multilateral trading system under the WTO, poses significant challenges to global trade norms. With the rules-based multilateral framework increasingly undermined by geoeconomic strategies, non-power economies like Bangladesh face heightened uncertainty in accessing predictable and preferential trade systems to enter international markets as well as resolve disputes.

Bangladesh's challenges and opportunities arising from President Trump's second term will depend on the resultant outcomes endured by the global economy. While many consider hiking tariffs to be just threats or negotiating tools for achieving foreign policy objectives that might not actually be implemented, the first term of his presidency did demonstrate proactive actions, particularly against China, setting new norms of US trade policy that continued to be pursued by the Biden administration. If new Trump tariffs are imposed on China and numerous other countries as feared, some estimates suggest the global economy could shrink by 0.8-1.3 percent, and global trade by three percent. Asia, accounting for 60 percent of global growth, would be hit hard by a trade war between the United States and China.

If uniform tariff rates are imposed on all suppliers to the US, Bangladesh's exporters may retain their relative competitiveness, but the overall impact is expected to be negative due to reduced trade flows as tariffs raise prices and dampen demand. On the other hand, if significantly higher tariffs are levied on China only, Bangladesh could benefit from trade diversion as global buyers seek alternative suppliers.

VISUAL: COLLECTED

However, these potential gains may be subdued or entirely offset if widespread trade wars lead to a reduction in global income and spending.

Furthermore, as many economists argue, Trump tariffs raise production costs and consumer prices in the US, exacerbating inflationary pressures. Evidence from post-Covid stabilisation measures in developed countries suggests that, in periods of high inflation, consumers disproportionately cut back on discretionary spending, particularly on clothing and footwear.

With over 90 percent of Bangladesh's exports concentrated in these sectors, such trends could pose significant challenges for the country's export earnings.

It is also worth pointing out that if the US, as the world's largest economy, takes recourse to high tariffs, other countries' currencies could depreciate due to reduced export revenues, weaker foreign exchange inflows, and a shift in investor sentiment towards the US dollar as a safe haven. The risk of competitive devaluation among key trading partners could exert substantial pressure on Bangladesh's currency, exacerbating its foreign exchange vulnerabilities and undermining export competitiveness in the highly price-sensitive apparel sector. Combined with the prevailing inflationary pressures and weak foreign reserves, trade policies under the Trump administration could further complicate Bangladesh's ongoing macroeconomic stabilisation efforts.

The challenges posed by Bangladesh's impending LDC graduation, currently scheduled for November 2026, are likely to be exacerbated by the high tariffs and weakened multilateralism associated with Trump's policies, as the erosion of preferential trade benefits coincides with an increasingly protectionist global environment. The weakening of the multilateral system under the WTO could restrict avenues for a graduating country to seek or negotiate favourable terms and challenge arbitrary trade measures, leaving Bangladesh particularly vulnerable to the shifting norms dictated by dominant geopolitical players.

VISUAL: SHAIKH SULTANA JAHAN BADHON

COSTS OF DEEPENED GEOPOLITICAL FRAGMENTATION FOR INNOCENT BYSTANDERS

President Trump's reinforced trade and economic policies are further rooted in the shifting global economic order. The intensifying geopolitical competition between the United States and China is fundamentally driven by the recognition that, for the first time, China has emerged as both an economic and strategic competitor—a distinction that sets it apart from previous challengers such as Russia, which remained primarily a strategic rival, or Japan, whose competition was largely economic. While the US seeks to safeguard its preeminent role in global trade and security, China's extraordinary economic rise, coupled with its expanding geopolitical influence through initiatives like the Belt and Road Initiative (BRI), represents a direct and multifaceted challenge to US hegemony. This evolving dynamic has prompted the adoption of unilateral measures, including tariffs and technology restrictions, many of which were pioneered during Trump's first term, in direct contradiction to established global rules. The multilateral framework of the WTO, long intended to be rules-based and ensure predictability in global trade, now faces profound threats as geoeconomic strategies increasingly overshadow cooperative norms. With Trump 2.0 charting a new trajectory, US powerplay risks further undermining, if not dismantling, the foundational principles of multilateralism, cementing a legacy of US nationalist policies that threaten to redefine global trade governance and fragment the international trading system.

Evidence from IMF research suggests that geoeconomic fragmentation, by raising trade costs and greater geopolitical polarisation, generally leads to lower trade and incomes. However, emerging markets and developing economies (EMDEs) tend to see the largest impacts: real per-capita income losses for the median EMDE in Asia are 80 percent larger, and for the median EMDE in Africa, 120 percent larger, than for the median advanced economy. This suggests that the costs of trade fragmentation could fall disproportionately on countries that can afford it the least.

Bangladesh’s challenges and opportunities arising from President Trump’s second term will depend on the resultant outcomes endured by the global economy. PHOTO: REUTERS

OPPORTUNITIES IN GEOPOLITICAL MINEFIELDS

The redefinition of global supply chains, driven by intensifying US-China geopolitical tensions, presents Bangladesh with a strategic opportunity to attract investments relocating from China as firms seek to diversify production bases. Additionally, the rise of restricted trade measures in the West could foster increased intra-Asian trade in sectors such as manufacturing and technology, creating new avenues for regional economic integration. Platforms like the Regional Comprehensive Economic Partnership (RCEP) offer Bangladesh a valuable framework to deepen regional ties and expand market access, particularly in a shifting global landscape.

Bangladesh's competitive labour costs, relatively young workforce, and established manufacturing base enhance its attractiveness as a destination for reshored investments. Multinational corporations, aiming to mitigate risks associated with concentrated supply chains, are likely to explore alternative production hubs, and Bangladesh is well-positioned to seize this moment. To fully realise these opportunities, however, the country must prioritise targeted policy interventions that improve infrastructure, streamline regulatory processes, and secure advantageous trade agreements.

While Bangladesh holds significant potential to attract shifting investments, its current investment climate—characterised by administrative inefficiencies and malpractices, inadequate infrastructure, and policy uncertainties—remains insufficiently conducive, risking the possibility that emerging opportunities may bypass the country unless substantial reforms are undertaken. Furthermore, the ongoing macroeconomic challenges, particularly the low level of foreign reserves, exacerbate concerns among potential foreign investors, who may perceive heightened risks related to profit repatriation and currency stability, thereby diminishing Bangladesh's competitiveness as an investment destination.

Attracting investment from China presents a delicate balancing act for Bangladesh, as such moves are often construed as aligning with growing Chinese influence, a development that could provoke apprehension not only from the United States but also from the other regional geopolitical power, India. The implications of such perceptions are far from hypothetical—Trump himself suggested imposing duties on automobiles manufactured in Mexico with Chinese investments if exported to the US. Moreover, in an era where global trade rules are increasingly flouted and multilateralism weakened, non-power economies like Bangladesh may find themselves subjected to arbitrary norms and standards dictated by dominant geopolitical players. This precarious landscape could amplify scrutiny over longstanding concerns such as labour practices in Bangladesh, potentially leading to the withdrawal of trade privileges and/or the imposition of restrictions under the guise of geopolitical manoeuvring.

ADAPTING TO UNCERTAINTY IN GLOBAL TRADE

Navigating the uncertain global landscape under Trump's presidency demands proactive strategies that prioritise mature and effective diplomatic engagements, as fostering constructive relationships with key trade and geopolitical actors becomes more critical than ever. This also requires an integrated approach involving policymakers, businesses, and other relevant stakeholders to prepare for a global trade and investment regime characterised by unpredictability and power asymmetries. Yet, even in such volatile circumstances, there is no substitute for enhancing external competitiveness and improving the domestic investment climate. A competitive export sector, coupled with an investor-friendly environment, not only mitigates vulnerabilities from shifting trade dynamics but also positions Bangladesh to seize emerging opportunities, ensuring resilience in the face of global uncertainties.