Tariff Development Creates Unease

Recent tariff development creates some unease, Chance of buying J-10C does not appear to cease.

Fresh debate on Bangladesh-USA bilateral trade agreement erupts after nitty-gritty of the deal was disclosed by the Bengali press. Former editor of the communist part run daily laid bare the details of the agreement on the Bengali daily Prothom Alo(see "Bangladesh Ke Mante Hobe 131 Shorto,Juktorashtro Ke 6(Bangladesh has to comply 131 clauses while the US have to comply 6)", Shawkot Hossein Masum,Daily Prothom Alo,May 4,2026.https://www.prothomalo.com/bangladesh/fumaag6mec). Others followed suit. Since then, there has been a growing cry to nullify the agreement, signed during the tenure of interim govt.

Incumbent Foreign Minister Khalilur Rahman,back then defense advisor, backed the deal by saying that it is the best bilateral deal available when it is compared with other agreements.

Few matters I find interesting to highlight here. The deal allows American insurance company not to generate business any more for Bangladeshi state-run insurance company. Earlier American insurance company was obliged to generate such business for local companies.

The deal questions legitimacy of subsidy in fisheries sector. It also underscores Intellectual Property Right,securing Bangladeshi commitment to stringent measures in case of violation of such rights.

The deal says Bangladesh will abstain from introducing discriminatory policies and taxes targeting digital services originating in the USA. In addition, American tech companies will not disclose source code of their products to Bangladeshi authority in order to do business here. However, this condition can be relaxed for the sake of public procurement or matters related to court.

The deal also says Bangladesh will take stern actions against any foreign country dumping goods into American markets using Bangladeshi soil.

The deal spares existing nuclear commitments but put severe restrictions on future nuclear deal.

The deal obliges Bangladesh to share subsidy related information with the USA.

The deal also forces Bangladesh to implement and ensure trade unions in companies operating in the export processing zones(EPZ). Most of Bangladesh's FDI comes from South East Asian countries. And EPZs offer highest salary and benefits to the workers in Bangladesh. This matter of trade unions in EPZs make the foreign investors unease. Particularly the South Koreans as they have seen the anarchy such unions caused back home. So it may have leverage on future FDI decisions.

The bilateral deal already starts to show its effect. Bangladesh recently signed a deal with Boeing to procure 14 aircrafts in a bid to slash trade surplus it enjoys in American market(see "Bangladesh signs biggest ever plane deal for 14 Boeings", yahoo finance,May 01,2026,https://finance.yahoo.com/economy/policy/articles/bangladesh-signs-biggest-ever-plane-204858697.html ).

Earlier in this space I speculated Bangladesh might buy Boeing-made combat aircraft to cut the trade surplus. The completion of Boeing deal put an end to that prospect. But it brings to fore potential procurement of Chinese combat aircraft.

Though the THINK TWICE Act of 2025 penalises countries buying Chinese arms, Bangladesh may evade the Act as it concluded talks of J-10C purchase before the Act came into effect.

Given the purchasing ability of Bangladesh and geopolitical tensions it faces, Washington may allow exception for Bangladesh as it allowed buying of Russian oil from the vessels in the wake of Iran war.

There has been some unease among the business community,particularly the exporters, with the development of the bilateral agreement with USA. Former World Bank lead economist in Bangladesh Zahid Hussain echoed their concerns in an analytical opinion piece titled "Tariffs spread the pain, refunds kept the gain", published on the Business Standard on May 02,2026 (see "Tariffs spread the pain,refunds kept the gain" ,Zahid Hussain, The Business Standard,May 02,2026,https://www.tbsnews.net/analysis/tariffs-spread-pain-refunds-kept-gain-1427221).

He highlighted that the US authority is paying back billions of dollar worth of tariff to the importers as the US Supreme Court rendered the tariff stance of Trump administration useless. But that money is not shared with Bangladeshi exporters who absorbed part of the tariff and witnessed shrinking of their profit margin. Bangladeshi exporters are also worthy of getting back part of the tariff money,he underscores.

There has been mixed reactions about the bilateral trade agreement. It is too early to tell what kind of impact it will have. But it will influence future trade agreements and FDI for sure. Simmering tensions can be felt for disproportionate distribution of tariff refund. It is speculated that the purchase of Chinese arms by Bangladesh may not be targeted by the THINK TWICE Act.