La Semaine Dernière A Mes Yeux

( 26 avril --- 02 mai)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
26	Pain,Papaye-Pomme de terre	Riz,Épinard d'éléphant, Pomme de terre	Riz,Épinard d'éléphant,Purée de pomme de terre,Papaye-Gourde épineuse	---
27	Pain,Omelette	Riz,Courge amère,Pomme de terre,Soupe aux lentilles	Riz,Pomme de terre,Courge amère,Gombo,Soupe aux lentilles	---
28	Riz,Soupe aux lentilles,Gombo	Riz,Épinard d'eau,Papaye-Gourde épineuse,Soupe aux lentilles	Riz,Soja -Pomme de terre,Épinard d'eau	---
29	Pain,Omelette avec soja	Riz,Épinard malabar,Omelette avec soja	Riz,Épinard malabar,Gombo-Brinjal	---
30	Pain,Paratha,Pomme de terre	Riz,Courge amère,Petit poisson,Soupe aux lentilles	Riz,Courge amère,Petit poisson,Soupe aux lentilles	---
01	Pain,Pomme de terre	Riz,Egg curry(marché)	Pain	---
02	Pain	Riz,Courge amère,Soja,Haricot vert,Purée de pomme de terre,Soupe aux lentilles	Riz,Courge amère,Purée de pomme de terre,Haricot vert,Soupe aux lentilles	---

Challenge Posed By Currency Tool

Striking the iron when it is hot, Strong local currency is what you got.

The World Bank lowered growth forecast for Bangladesh to 3.3 % for FY 2026. Moreover, it fears more than 3 million Bangladeshis may go under poverty line next year. Despite sign of reconciliation between the USA and China (President Trump hints lowering the tariffs on China and China exempts few US items from retaliation list) ,prospect of global trade remains uncertain. There is no sign that a consensus will be reached within 90 days though bilateral negotiation is in full swing with many countries. The Federal Reserve plans to lower the policy rate in May. It will weaken the USD. At the same time, it will be high time for the US to employ the currency tool if the ongoing negotiation may not yield expected result. I think the Trump administration will not wait too long to employ the tool. They want to do the unpleasant things at the start of the tenure and reap the benefits at the last leg of the tenure, when the fallout of the reciprocal tariffs will be offset and faded from people's memory.

Given the lack of response from outside world, it is highly likely that Trump administration may resort to currency tool this year. Will the Fed allow the Trump administration to print and $1 trillion and give it to procure rivals' currencies in a bid to appreciate their value against USD?Answer is still unknown ,but further weakening of US dollar will put appreciation pressure on other currencies.

To make clear my point, let us take a look at the formula of Real Effective Exchange Rate(REER):

REER at period t= (Exchange rate index of a country x Inflation rate of the country)x 100÷(Average of trading partners' exchange rate index x weight x Average of inflation rates in partner countries)

Exchange Rate Index at t= (Exchange rate of a county's currency at t)÷(Exchange rate of a county's currency at base period)

The US do trade with most of the countries. Any weakening of US dollar (look at the denominator) means REER of a currency appreciates given its exchange rate remains the same. The USA accounts 20% of our exports whereas the EU accounts more than 45% of our exports. Meanwhile, China and India are our top two importing [sources]. Moreover, except Eurozone, Bangladesh does trade with most of its trading partners in USD. So USD carries [(if not then it should)]more weight in REER calculation and thereby deeply influences REER of Taka. The point is any future depreciation [of USD] will put appreciation pressure on Taka (look at the formula). Since the tariff debate,we have seen Euro, Yuan [,] Dong, Rupee depreciated. This clearly makes possibility of REER appreciation of Taka stronger unless the central bank intervenes in the forex market.

We cannot make great leap towards productivity through technological innovation [in short span of time]. But we can retain the competitiveness through local currency depreciation. For that central bank's active role is what we needed.

Trump administration can also employ International Emergency Economic Powers Act that permits the US president to withhold interest payment on US treasury bonds or to freeze payments to other countries. When this will happen many countries will try to lower their US treasury bond holding, leading to appreciate their currencies. Either approach leads to REER appreciation of local currency.The USA will try its best to make USD less attractive as the reserve currency. So central bank should have a contingency plan on how to convert part of the reserve in gold,Euro or other IMF reserve currencies.

La Semaine Dernière A Mes Yeux

( 19 avril --- 25 avril)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
19	Pain,Beurre à cacahouète (fait par moi),Œuf	Riz,Papaye-Pomme de terre,Courge amère	Riz,Papaye-Pomme de terre,Courge amère	---
20	Pain,Beurre à cacahouète (fait par moi),Œuf	Riz,Courge amère,Concombre,Soupe aux lentilles	Riz,Pianju(marché),Courge amère,Concombre,Soupe aux lentilles	---
21	Pain,Concombre,Courge amère, Beurre à cacahouète (fait par moi)	Riz,Gourde serpent,Gourde serpent,Soupe aux lentilles	Riz,Soja,Pangash	Toast Biscuit
22	Pain,Beurre à cacahouète (fait par moi),Soja,Patate douce	Riz,Courge amère,Pangash	Riz,Pangash,Courge amère,Concombre	---
23	Pain,Œuf	Riz,Courge amère,Papaye-pomme de terre,Soupe aux lentilles	Riz,Courge amère,Papaye-pomme de terre	---
24	Pain,Œuf	Riz,Courge amère,Brinjal avec haricot rouge	Riz,Courge amère,Soupe aux lentilles,Gombo	---
25	Pain,Œuf	Riz,Épinard d'éléphant,Soja	Riz,Épinard d'éléphant,Harico mètre	---

Saturday, April 19, 2025

REER Hints Strong Taka

A strong Taka is signalled by REER, Depreciation may bring forex sheer.

A news report divulged that Bangladeshi Taka's Real Effective Exchange Rate(REER) has strengthened/appreciated to 100 in March 2025. In January, it was 103 point somthing. REER is the weighted average of a country's currency in relation to a basket of major trading partners' currencies taking into account inflation prevailing [in] the country and trading partner countries. Taka's REER appreciation means we need less Taka to get 1 Trading Partner Currency (average of major trading partner currencies) from the market. That means value of Taka against major trading partner currencies strengthened/increased/ appreciated, not decreased!

If this is true ,then why there is no reflection of it on the official website of the Bangladesh Bank(BB)?BB website still [pegs] 1 USD at Tk 122. Meanwhile, googling USD-Taka exchange rate will show you that major foreign exchange houses offer Tk 121 point something for 1 USD. But earlier BB governor had claimed that exchange rate is evaluated daily. There is a mismatch. Following the imposition of reciprocal tariff,USD depreciated/weakened against major currencies. That is why 1 USD fetching Tk 121 point something not Tk 122!

Appreciation of Taka's REER is also a cause of concern. It indicates reduced competitiveness of Bangladeshi products in international market. In addition, import also becomes cheaper. Though depreciation pressure is low,BB can create an atmosphere for it. And it is pretty much in line with its ongoing objective.

IMF noted that forex reserve has stabilized but there is no sign that reserve is gradually growing month by month. BB can change the status quo by buying USD from the local market. It will increase the [demand] for USD at home and depreciate the local currency. Market conditions can easily deal with 10% depreciation. We do not know what will happen 3 months later when the pause on tariff will be lifted. So this is the high time for BB to intervene in the forex market to depreciate Taka against USD. Bangladesh Bank's own study acknowledges that real export declines in the wake of appreciation of REER.

Now, depreciation intervention is advantageous from the point of view of BB. It has to swell the forex reserve to get the next installments of the IMF credit package. Vietnam Dong, Rupee, Yuan all the currencies depreciated following the reciprocal tariff. Bangladeshi currency has not done it yet. It has to be appreciated first,as the REER tells, then it requires serious depreciation to make Bangladeshi goods more competitive. For that, BB's intervention is a must.

Recipe For Meeting The Revenue Target

Meeting revenue target and boosting foreign currency, Depreciation is the best bet in this urgency.

Bangladesh Bureau of Statistics (BBS) has revealed the March inflation data. General inflation increased slightly to 9.35%. Though food inflation declined from 9.24% to 8.93%, non-food inflation rose to 9.70% from 9.38% in February. On several occasions, Bangladesh Bank Governor stressed policy rate will be lowered when inflation will be lower than 8%. On going trade war casts shadow over global commodity demand, setting a downward pressure on inflation. Positive real interest rate ( since January) and decline in inflation show sign of optimism in containing the inflation. Uncertainties unleashed by tariff cast shadow over GDP growth,forcing ADB to lower its growth forecast to 3.8% for Bangladesh. Govt is planning to downsize the budget by Tk [70 billion*], a record in recent years acknowledging the reality. The IMF has set new revenue target of Tk 570 billion for the rest of the fiscal year as a condition to get the fourth and fifth installments of the credit package.

So meeting the revenue target and staying competitive amid uncertainties and contractionary policy appear to be the challenges faced by this govt. Govt is continuing the monthly fuel price adjustment through Bangladesh Energy Regulatory Commission (BERC). To make BPC profitable, it has not lowered the prices for last couple of months. When oil prices at international market show a downward pressure, lowering fuel prices at home will help tremendously its subsequent policy actions. In May 2024,I penned a piece titled "BB's Twin Actions" where I argued how depreciation of Taka at one hand increases govt revenue through market mechanism and, on the other , boosts export without deteriorating the inflationary situation. Briefly repeating the argument again: depreciating the local currency will help NBR bagging a huge revenue from the import duties,which account for a large part of revenue collection; it will also halt the need for unnecessary incentives for exporters and remitters as higher exchange rate itself works as incentives. Govt has 2.5 months in this fiscal year and a depreciation is a must (say 10%) to meet the big jump in revenue [collection]. Time is perfect for doing so as oil prices declined by 7% than what it was prior to reciprocal tariff announcement.

As I highlighted in my previous piece, this depreciation also makes Bangladeshi goods more competitive without incurring extra spending. Not far too often we have this chance to go for depreciation. It also makes our position at the negotiation table much more comfortable. We know our goods have become competitive again and govt does not have control over private sector when many of the goods may become cheaper in international market in future. Now at the negotiation table , you promise to import some specific goods more, but in future it turns out that at the international market its prices will come down. Then you have to import it at higher prices to respect the deal at the cost of trade account balance and current account balance, crucial for a tiny country like us. So focus should be [on how] to narrow down trade imbalance between the two countries without mentioning any specific item. When international market says an American good is cheaper, we will buy it more from them. Some goods are strategically important for us. Soybean, LNG,cotton,scrap metal are used as intermediate goods in agriculture, RMG,Transport, steel and real-estate sectors. So these goods could be bought in abundance. In addition, used car,beef,pecan,wheat,biofuel,used bus/van could be considered for import if their prices are competitive in international market.

In brief, depreciation will augment govt's revenue to get the IMF credit and boost future export and remittances. It will also put us in a comfortable position to negotiate with the USA.

[*Update: This piece has been updated on April 15,2025 at 20:55 PM Bangladesh Standard Time.Update includes the revised budget downsize figure.]

La Semaine Dernière A Mes Yeux

( 12 avril --- 18 avril)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
12	Riz,Haricot rouge,Pois blanc,Œuf	Riz,Pois blanc,Poulet ,Concombre	Riz,Poulet ,Concombre	---
13	Riz,Poulet,Pois blanc	Riz,Ruhi,Tige amarante -Pomme de terre-Sec crevette,Concombre,Soupe aux lentilles	Riz,Pianju(marché),Pois blanc,Œuf	Groseille de campagne
14	Riz,Poulet,Pois blanc	Riz,Œuf,Tige amarante avec sec crevette,Pianju	Riz,Concombre,Gombo	---
15	Pain,Beurre à cacahouète(fait par moi),Œuf	Riz,Mudskipper,Gombo,Gourde serpent,Purée de pomme de terre	Pain, Beurre à cacahouète(fait par moi),Purée de pomme de terre,Gourde serpent	Groseille de campagne
16	Riz,Mudskipper,Papaye-pomme de terre,Œuf	Riz,Gourde serpent,Pomme de terre	Riz,Gourde serpent,Pomme de terre	---
17	Riz,Gourde serpent,Pomme de terre	Riz,Ruban sec avec brinjal	Pain,Ruban sec avec brinjal,Pianju(depuis marché)	---
18	Khichuri,Omelette	Riz,Sec crevette,Gourde serpent,Pomme de terre	Riz,Gourde serpent,Pomme de terre,Pois blanc avec soja	---

Depreciation Is The Key

A correction fully translates tariff's rise in import prices, To fight risks,depreciation sounds best among the choices.

As the world is still coping with the uncertainties associated with reciprocal tariffs,Mr Trump made it clear that he has no intention to "pause the tariff". Meanwhile, Bangladesh decided to sent a letter to the USA to postpone the decision for 90 days. Govt is planning to bring down the tariff on several US goods so that import from the USA could rise. Govt is even mulling to import LNG from the USA.

What is worrying is that several US buyers are withholding their purchase orders for indefinite period. Chief disaccord turns out to be who will bear the extra price emanating from the tariff. Big brands remain silent here ,but others press the exporters here to bear fully the brunt of it.

Now latest development hints that researchers from American Enterprise Institute questioned the formula used for reciprocal tariff. Let us look at the formula again:

Change in tariffs= (US exports to partner - US imports from partner) ÷ (Elasticity of import demand with respect to import prices × Elasticity of import prices with respect to tariffs × US imports from partner)

The first two terms in the denominator are set to be -4 and 0.25 respectively. But the researchers pointed out that the Trump administration erroneously used elasticity of retail prices with respect to tariffs instead of elasticity of import prices with respect to tariffs(which is set to be 0.945 or 1). Elasticity of import demand with respect to import prices shows how much import demand changes in response to a 1% increase in import prices. Similarly, elasticity of import prices with respect to tariffs shows how much import prices change in response to a 1% increase in tariffs. Product of the two terms tells how much the import demand changes for 1 % increase in tariffs.

The researchers claim the original author (Alberto Cavallo) made it clear that tariffs are passed fully to import prices and elasticity of import prices with respect to tariffs is used in the calculation of the actual formula, not the retail prices (see"Trump's Formula 'Based On An Error' - Conservative Think Tank", Jason Lemon,Newsweek, April 5,2025). If this argument is true then a 1% increase in tariff leads to a decrease in [import] demand by 4%. Inflation is also much higher than the earlier estimation.

The corrected reciprocal formula [may] significantly lower Bangladesh's tariffs to 9% (0.185 divided by 2), much lower than the earlier 37%.

Stephen Miran in his paper, discussed in the previous piece, argues that if the tariffed country fully depreciates its currency then price of the tariffed good will not rise in the USA. However, if the tariffed country does not cooperate, price of the imported good rises. So the corrected formula shows imported good's price increases fully in response to an increase in tariff, depicting the noncooperation scenario. Under the corrected formula, Bangladesh's tariff becomes even lower (7%) when trade deficits take into account tariffs already paid to the USA on exports.

So, in brief, Bangladesh faces tariffs in the range of 9% to 37%.

The USA shows no sign of relaxing it and Bangladesh is a marginalized country, hinges on exports and remittances heavily. Unilaterally, Bangladesh can depreciate Taka and retain the competitiveness , mitigating the risks posed by reciprocal tariffs. In the previous piece, I argued that Bangladesh can easily depreciate Taka 10% by now and near future without any trouble. We witness crude oil prices already dropped by 7% in the international market. The uncertainty is still there,indicating oil prices may plunge even further. So passthrough effect of 10% depreciation will be offset by fall in oil prices.

In the case of worst case scenario( tariffs stay for indefinite period), we have to depreciate the currency by 37%. So exchange rate of USD against Taka will be varied between Tk 134.20(10%) and Tk 167 (37%).

Compared to China, Vietnam and Cambodia, Bangladesh's tariffs are lower. China cannot sustain 104% depreciation of Yuan. Capital flight will be enormous. So Bangladesh does not need to compete with China to depreciate its currency by that insane amount.

Depreciation will work as incentives for the exporters and consumers will not feel the heat amid falling oil and commodity prices globally. The SMEs may incur loss from rising cost of imported goods. But Bangladesh Bank already installed a mechanism of extended credit facility for the SMEs to mitigate the loss from interest rate rise. Its coverage can be extended for mitigating risks from exchange rate variation. So more SMEs which do not know how to cope with risks from interest rate rise and exchange rate variation could be brought under its coverage. Giving them credit for 3/4 years will allow them to sustain their businesses in the face of potential risks from volatility.

Taka depreciation works to address many of the challenges emanating from this tariff debate. Meanwhile, Chinese central bank lowered the reserve requirements for the banks in a bid to increase liquidity in the market. On the other hand, the Federal Reserve is scheduled to lower the policy rate by May. This means foreign credit will be cheap in the coming months. As China is keen to depreciate the Yuan and gives its firms and institutions more money to invest ,some will end up abroad for sure.

As Taka depreciation sounds more plausible than any other measure, we should go for it. We have a valid reason for doing so. Foreign buyers want it,international commodity prices set the right context and incentives for exporters amid monetary contraction policy call for depreciation of Taka.

In brief things surfaced here from above discussion are: a claim says original formula reflects complete increase in import prices resulting from an increase in tariff. This correction [may] further lower reciprocal tariffs for Bangladesh and it is manageable for the govt [if the correction is taken into consideration]. Depreciation of Taka appears to be the plausible solution for the moment given the prevailing context.

La Semaine Dernière A Mes Yeux

( 5 avril --- 11 avril)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
04	Riz,Soupe aux lentilles,Œuf	Riz,Papaye-Gourde pointue-Pomme de terre,Soupe aux lentilles	Riz,Papaye-Gourde pointue-Pomme de terre,Soupe aux lentilles	Patate douce
05	Riz,Papaye-Pomme de terre-Gourde pointue,Œuf	Riz,Brinjal-Pomme de terre-Gombo-Sec crevette	Pain,Beurre à cacahouète (fait à la maison)	Patate douce
06	Riz,Papaye-Gourde pointue-Pomme de terre ,Œuf	Riz,Brinjal avec sec crevette	Pain,Beurre à cacahouète (fait à la maison)	---
07	Riz,Papaye-Pomme de terre-Gourde pointue,Œuf	Riz,Brinjal-Pomme de terre-Gombo-Sec crevette,Moringa,Concombre	Pain,Beurre à cacahouète (fait à la maison)Pabda	---
08	Riz,Pangash,Pois blanc	Riz,Feuilles de taro et pomme de terre,Batasio Tengra	Pain,Batasio Tengra,Feuilles de taro et pomme de terre	---
09	Riz,Batasio Tengra	Riz,Pangash,Purée de pomme de terre	Paratha,Beurre à cacahouète (fait à la maison),Papaye-Pomme de terre	---
10	Paratha,Beurre à cacahouète (fait à la maison),Papaye-Pomme de terre	Riz,Feuilles de Jutte,Brinjal avec sec latya	Riz,Feuilles de Jutte,Brinjal avec sec latya	Laddu à citrouilles (fait à la maison)
11	Pain,Riz,Œuf,Pabda	Riz,Haricot rouge avec ruban sec,Batasio Tengra	Riz,Haricot rouge avec ruban sec,Batasio Tengra	Laddu à citrouilles (fait à la maison)

Reshaping Global Trading System: What Lies Ahead

Trade restructuring starts with tariff debate, Leading to multiple systems as global trade's fate.

The Trump administration imposed 37% reciprocal tariffs on Bangladeshi exports to the USA. The imposed tariffs are much higher than its rivals to the US market. The disruptive action is not a deliberate but well planned move to reorder the global trading system. In 2024, the USA incurred a budget deficit of $1.83 trillion. In addition, the US gross debt to GDP reached 120%. And that is not all. The Tax Cuts and Jobs Act 2017 allows US citizens to enjoy reduced income tax rates till 2026. The Act also reduced corporate tax rate to 21.2%. Economist Stephen Miran, who is also the current chair of the Council of Economic Advisors, argues in his "A User's Guide To Restructuring The Global Trading System" ( a policy paper published by Hudson Bay Capital in November 2024) to continue tax rebate beyond 2026 the US economy requires $5 trillion every year. Deficits plus the extra money to sustain the policies means the money has to come from somewhere else. And the solution is to tariff the other countries. This,he thinks,is one of the tools to reshape the global trading order.

We can clearly see here the US runs huge budget deficits, yet USD remains overvalued decades after decades. Because the US dollar is beings used as reserve currency/asset in many other countries. Any devaluation of the US currency would result in loss of reserve asset in other countries.

But to make America great again, to bring back the manufacturing plants from other parts of the world to the USA and to make American goods more competitive ,you need to do something. At the heart of US - China trade dispute during Trump's first presidency is the undervalued Yuan. Appreciation of the Yuan will take away the competitive advantage of many manufacturing items and help relocating their plants in other parts of the world including the USA. Over the years, this perception of undervalued currency extended to currencies of other countries. Added to that the idea of America is forced to overvalue its currency to maintain ongoing order. So Miran came up with some tools in his paper,which he would like to describe as an essay to comprehend their consequences, to fix the issue and thereby help the Trump administration achieving "Make America Great Again". The other tool is the currency, which will be touched a little later.

The tariff drives up the domestic price of the tariffed good,a general perception. Miran argues it will not happen if the tariffed /exporting country depreciates its currency to the full magnitude of the tariff. That means if Bangladesh depreciates its currency by 37% then prices of its exportable items will not rise in the US market. Tariff is not inflationary in this case. And forex reserve will continue to grow for Bangladesh. Bangladesh Bank with its foreign currency will buy treasury assets. And individuals holding foreign currency will buy foreign goods. Think of China that has a closed capital market. The Chinese govt restricts investment abroad. So holders of foreign currency are forced to invest in less productive and risky domestic assets like real estate that accumulated huge bad debt. Miran argues continuing currency devaluation under capital controls will not sustain amid high tariffs. So there will be great capital flight from China. And it will force the Chinese central bank to raise interest rate , leading to appreciation of Chinese currency. The plus side of tariff war is that the US govt will get revenue without incurring the inflation. However, the US may lose revenue if the partner country does not depreciate the currency and an ensuing inflation may be expected.

The currency tool has two approaches: the multilateral approach and the unilateral approach. In the multilateral approach, the US sits with major trading partners and convince them to appreciate/strengthen their currencies and to depreciate/weaken the USD. This starts to happen when they start to sell USD from their forex reserve. The US starts to buy those dollars and issues new treasury security with duration of 100 years. In addition, the US sells those bonds to friendly countries who need security assistance in troubled waters and territories. By the way, the century bonds will replace the short and medium term bonds,easing the burden of the Fed to make huge interest payments and improving the budget deficits. Here the US projects the global security assistance as public good. And buying the century bond ,you are actually paying for that public good. In addition, holders of the century bond will enjoy favorable tariffs in the US market while the hostile partner will face a different kind of tariff. This multilateral currency approach has a precedent. In 1985, the US,France,UK,Germany and Japan met at the Plaza hotel and agreed to devalue the USD.

The unilateral approach reveals the leverages the US has to reshape the global trading system.It emerges when multilateral approach fails(many countries do not give consent to devalue dollar). One of the leverages is the International Emergency Economic Powers Act 1977 that allows the US president to halt and limit transfers of credit, payments or securities internationally. The US could hold part of the interest payments on treasury security in a bid to make USD unattractive for using it as reserve currency. This will lead countries to lower the size of their USD holdings, creating a depreciation pressure on USD.

Another leverage is the reserve accumulation,which means the US will buy other currencies in a bid to increase the demand of other currencies provided that the Fed prints and supplies the much needed USD.

So far the USA employed the tariff tool. The currency tool has not yet been applied yet. Stephen Miran's work is the guiding principle of Trump's fiscal policy. There is some kind of thinking behind this latest policy action.

Here are my observations:

1. The tariff tool tends to worsen the inflationary pressure in the partner country. The pass through effect(37%) of depreciation may become unmanageable. I hope the US and Bangladesh starts negotiating tariff terms soon and bring about a solution.
2. What about the European countries? They have a common currency. Yet they face different tariffs. How do they depreciate the Euro? Will the members agree and allow the European central bank to depreciate the Euro?
3. The formula used to calculate the tariffs does not take into account tariffs paid by the member countries. The formula ,which is criticized right and left ,is:

   Change in tariffs= (US exports to partner - US imports from partner) ÷ (Price elasticities of import demand × Import price elasticities with respect to tariffs × US imports from partner)

   According to Pew research center, Bangladesh paid 15.2% tariffs on its exports to the US in 2024, much higher than what the other countries in the South and South-East Asia paid(see "Bangladeshi Exporters Pay Highest Tariff In US Market", Textile Today,April 23,2018). It has been doing so more than a decade. This means Bangladesh pays more money to US govt than its rivals in exports. Yet this acknowledgment is not reflected in reciprocal tariffs. If the trade deficit is adjusted for the revenue paid by the partner country, the reciprocal tariffs become much lower. In 2024, Bangladesh exported $8 billion to the USA and imported $2 billion worth of goods and paid $1.216 billion as tariffs(15.2% of $8 billion export). Taking into account the tariffs already paid, the adjusted trade deficit becomes $4.784 billion and and the resulting reciprocal tariff is around 29%.
4. The reciprocal tariff formula used, it appears,tries to capture overvaluation/undervaluation of a partner currency through the trade surplus/ deficit. If partner country's currency is undervalued ,the trade deficit will be larger,so will be the reciprocal tariff. So a political consideration is being played out in this formulation of tariff. It is all about to redesign the trade rules,keeping certain countries out of the global trading system.
5. If currency tools come into effect, then Bangladesh may incur loss in forex reserve. To mitigate the loss, Bangladesh should immediately convert part of its forex reserve into gold. Say USD depreciates by 20% ,then we should buy gold with the 20% of forex reserve.
6. Following the Plaza Accord, the Yen appreciated and the Japan went into recession. If the Euro zone and the Japan go into recession again, our export will dip and we will face serious macroeconomic instability.
7. Threat perceptions and security concerns are different for different countries. Territorial encroachment appears to be bigger threat. In that light,former foe may become ally to defend my territory. This is particularly true for Europe. China has vast frontiers with the Russia. In case of any aggression to Europe, it can mobilize troops along the Russian border and defuse tensions between Russia and Europe. In that light the Chinese security assistance is more plausible for the Europe than the one provided by the USA. Intertwining trade and security concerns does not address the issue.
8. If trade and security concerns are intertwined, there will be many new trading systems, not just one. These regional blocs then draft rules to do trade among the blocs,abolishing the WTO or reinventing its roles in the world of multiple providers of global security.

Stephen Miran's work lays out the blueprint for the new trading system and subsequent action of Trump tells that the recent move is a political one. Trump administration wants renegotiation of trading terms among the partner countries. He wants to weaken the dollar, keep the tax rate low for the Americans, relocation of manufacturing plants of high-end products like semiconductor, automobiles in the USA , so that the US narrow down the trade deficits and remain a formidable power. I hope this tariff war will not last long, because impoverished world is not the result we want to see here. Bangladesh should brace itself for a world with multiple trading systems. For the moment, Bangladesh should also prepare itself for worst case scenario: the reciprocal tariffs stay for indefinite period. Many try to argue that our rivals will take advantage from the heightened tariffs. Harmonized system code for our export items will get us find our true rivals.Cambodia, Vietnam ,China and Pakistan appear to be our rivals in exports. Even if India manages some advantages from the ensuing tariffs,Bangladesh can offset the advantage by depreciating its currency. A 10% depreciation of Taka( difference between the tariffs faced by Bangladesh and India in the US) will bring the trade favor on our side. Our economy can sustain the effect of 10% depreciation of Taka at this moment or near future. One thing emerges clear as the sun is that Taka has to be depreciated in future.