Recently, the U.S. government has continued to escalate its “reciprocal tariff” policy, formally including Bangladesh and Sri Lanka in the sanctions list and imposing high tariffs of 37% and 44% respectively. This move has not only dealt a “targeted blow” to the economic systems of the two countries, which are highly dependent on textile exports, but also triggered a chain reaction in the global textile supply chain. The U.S. domestic textile and apparel industry has also been caught in the dual pressures of soaring costs and supply chain turmoil.
I. Bangladesh: Textile Exports Lose $3.3 Billion, Millions of Jobs at Stake
As the world’s second-largest garment exporter, the textile and apparel industry is the “economic lifeline” of Bangladesh. This industry contributes 11% of the country’s total GDP, 84% of its total export volume, and directly drives the employment of more than 4 million people (80% of whom are female laborers). It also indirectly supports the livelihoods of over 15 million people in the upstream and downstream industrial chains. The United States is Bangladesh’s second-largest export market after the European Union. In 2023, Bangladesh’s textile and apparel exports to the U.S. reached $6.4 billion, accounting for more than 95% of its total exports to the U.S., covering mid-to-low-end fast-moving consumer goods such as T-shirts, jeans, and shirts, and serving as a core supply chain source for U.S. retailers like Walmart and Target.
The U.S. imposition of a 37% tariff on Bangladeshi products this time means that a cotton T-shirt from Bangladesh, which originally had a cost of $10 and an export price of $15, will have to pay an additional $5.55 in tariffs after entering the U.S. market, pushing the total cost up to $20.55 directly. For Bangladesh’s textile industry, which relies on “low cost and thin profit margins” as its core competitive advantage, this tariff rate has far exceeded the industry’s average profit margin of 5%-8%. According to estimates by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), after the tariffs take effect, the country’s textile exports to the U.S. will plummet from $6.4 billion annually to approximately $3.1 billion, with an annual loss of up to $3.3 billion—equivalent to stripping the country’s textile industry of nearly half of its U.S. market share.
More critically, the decline in exports has triggered a wave of layoffs in the industry. So far, 27 small and medium-sized textile factories in Bangladesh have ceased production due to lost orders, resulting in the unemployment of about 18,000 workers. The BGMEA has warned that if the tariffs remain in place for more than six months, more than 50 factories across the country will close down, and the number of unemployed people may exceed 100,000, further impacting social stability and people’s livelihood security in the country. At the same time, Bangladesh’s textile industry is highly dependent on imported cotton (about 90% of cotton needs to be purchased from the U.S. and India). The sharp drop in export earnings will also lead to a shortage of foreign exchange reserves, affecting the country’s ability to import raw materials such as cotton and creating a vicious cycle of “declining exports → shortage of raw materials → capacity contraction”.
II. Sri Lanka: 44% Tariff Breaks Cost Bottom Line, Pillar Industry on Brink of “Chain Breakage”
Compared with Bangladesh, Sri Lanka’s textile industry is smaller in scale but equally a “cornerstone” of its national economy. The textile and apparel industry contributes 5% of the country’s GDP and 45% of its total export volume, with more than 300,000 direct employees, making it a core industry for Sri Lanka’s economic recovery after the war. Its exports to the U.S. are dominated by mid-to-high-end fabrics and functional clothing (such as sportswear and underwear). In 2023, Sri Lanka’s textile exports to the U.S. reached $1.8 billion, accounting for 7% of the U.S. import market for mid-to-high-end fabrics.
The U.S. increase of Sri Lanka’s tariff rate to 44% this time makes it one of the countries with the highest tariff rates in this round of “reciprocal tariffs”. According to an analysis by the Sri Lanka Apparel Exporters Association (SLAEA), this tariff rate will directly push up the country’s textile export costs by about 30%. Taking Sri Lanka’s flagship export product—”organic cotton sportswear fabric”—as an example, the original export price per meter was $8. After the tariff increase, the cost rose to $11.52, while the cost of similar products imported from India and Vietnam is only $9-$10. The price competitiveness of Sri Lankan products has been almost completely eroded.
At present, a number of export enterprises in Sri Lanka have received “order suspension notices” from U.S. customers. For instance, Brandix Group, Sri Lanka’s largest garment exporter, originally produced functional underwear for the U.S. sports brand Under Armour with a monthly order volume of 500,000 pieces. Now, due to tariff cost issues, Under Armour has transferred 30% of its orders to factories in Vietnam. Another enterprise, Hirdaramani, stated that if the tariffs are not lifted, its export business to the U.S. will suffer losses within three months, and it may be forced to close two factories located in Colombo, affecting 8,000 jobs. In addition, Sri Lanka’s textile industry relies on the “processing with imported materials” model (imported raw materials account for 70% of the total). The blockage of exports will lead to the backlog of raw material inventory, occupying the working capital of enterprises and further exacerbating their operational difficulties.
III. U.S. Domestic Sector: Supply Chain Turmoil + Soaring Costs, Industry Caught in “Dilemma”
The U.S. government’s tariff policy, which seems to target “overseas competitors”, has actually caused a “backlash” against the domestic textile and apparel industry. As the world’s largest importer of textiles and apparel (with an import volume of $120 billion in 2023), the U.S. textile and apparel industry presents a pattern of “upstream domestic production and downstream import dependence”—domestic enterprises mainly produce raw materials such as cotton and chemical fibers, while 90% of finished clothing products rely on imports. Bangladesh and Sri Lanka are important sources of mid-to-low-end clothing and mid-to-high-end fabrics for the U.S.
The tariff increase has directly pushed up the procurement costs of U.S. domestic enterprises. A survey by the American Apparel and Footwear Association (AAFA) shows that the average profit margin of U.S. textile and apparel suppliers is only 3%-5% currently. A 37%-44% tariff means that enterprises either “absorb the costs themselves” (leading to losses) or “pass them on to end prices”. Taking J.C. Penney, a U.S. domestic retailer, as an example, the original retail price of jeans purchased from Bangladesh was $49.9. After the tariff increase, if the profit margin is to be maintained, the retail price needs to rise to $68.9, an increase of nearly 40%. If the price is not increased, the profit per pair of pants will drop from $3 to $0.5, leaving almost no profit.
At the same time, supply chain uncertainty has put enterprises in a “decision-making dilemma”. Julia Hughes, President of the AAFA, pointed out at a recent industry conference that U.S. enterprises originally planned to reduce risks by “diversifying procurement locations” (such as transferring some orders from China to Bangladesh and Sri Lanka). However, the sudden escalation of the tariff policy has disrupted all plans: “Enterprises do not know which country will be the next to be hit with tariff increases, nor do they know how long the tariff rates will last. They dare not easily sign long-term contracts with new suppliers, let alone invest funds in building new supply chain channels.” Currently, 35% of U.S. apparel importers have stated that they will “suspend the signing of new orders”, and 28% of enterprises have begun to re-evaluate their supply chains, considering transferring orders to Mexico and Central American countries that are not covered by tariffs. However, the production capacity in these regions is limited (only able to undertake 15% of U.S. apparel imports), making it difficult to fill the market gap left by Bangladesh and Sri Lanka in the short term.
In addition, U.S. consumers will ultimately “foot the bill”. Data from the U.S. Bureau of Labor Statistics shows that since 2024, the U.S. Consumer Price Index (CPI) for apparel has risen by 3.2% year-on-year. The continuous fermentation of the tariff policy may lead to a further 5%-7% increase in apparel prices by the end of the year, further intensifying inflationary pressures. For low-income groups, clothing expenditure accounts for a relatively high proportion of disposable income (about 8%), and rising prices will directly affect their consumption capacity, thereby curbing the demand for the U.S. domestic apparel market.
IV. Reconstruction of Global Textile Supply Chain: Short-Term Chaos and Long-Term Adjustment Coexist
The U.S. escalation of tariffs on Bangladesh and Sri Lanka is essentially a microcosm of the “geopoliticization” of the global textile supply chain. In the short term, this policy has led to a “vacuum zone” in the global mid-to-low-end apparel supply chain—order losses in Bangladesh and Sri Lanka cannot be fully absorbed by other countries in the short term, which may trigger “inventory shortages” for some U.S. retailers. At the same time, the decline of the textile industries in these two countries will also affect the demand for upstream raw materials such as cotton and chemical fibers, causing an indirect impact on cotton-exporting countries such as the U.S. and India.
In the long term, the global textile supply chain may accelerate its adjustment towards “nearshoring” and “diversification”: U.S. enterprises may further transfer orders to Mexico and Canada (enjoying tariff preferences under the North American Free Trade Agreement), European enterprises may increase procurement from Turkey and Morocco, while Chinese textile enterprises, relying on their “full industrial chain advantages” (a complete system from cotton cultivation to finished product manufacturing), can take over some mid-to-high-end orders (such as functional fabrics and eco-friendly clothing) transferred from Bangladesh and Sri Lanka. However, this adjustment process will take time (estimated 1-2 years) and will be accompanied by increased costs for supply chain reconstruction, making it difficult to fully alleviate the current industry turmoil in the short term.
For Chinese textile foreign trade enterprises, this round of tariff turmoil brings both challenges (needing to cope with weak global demand and supply chain competition) and hidden opportunities. They can strengthen cooperation with local factories in Bangladesh and Sri Lanka (such as providing technical support and joint production) to avoid U.S. tariff barriers. At the same time, they can increase efforts to explore emerging markets such as Southeast Asia and Africa, reducing dependence on a single market in Europe and the U.S., thereby gaining a more favorable position in the reconstruction of the global supply chain.
Post time: Aug-16-2025