A court ruling in Washington on tariffs leaves Bangladesh rethinking its US trade bargain

The United States Supreme Court’s decision on Friday to invalidate President Donald Trump’s sweeping tariff regime has landed like a legal thunderbolt far beyond Washington, unsettling trade arrangements in distant capitals that had already recalibrated their economic futures around America’s revived protectionism.

Few countries illustrate the stakes more vividly than Bangladesh, which only weeks ago struck a hard-fought trade agreement designed to blunt the impact of those very tariffs.

Now, with the legal foundation of the tariff threat suddenly removed, Dhaka finds itself confronting an uncomfortable question of whether it conceded too much in exchange for a tariff relief that may no longer exist.

At first glance, the Bangladesh-US deal was a triumph of arithmetic over ideology. The agreement lowered reciprocal tariffs on Bangladeshi exports to 19% from rates that could have climbed as high as 37%, sparing exporters an estimated $1.4 billion annually in duty costs.

For a country whose garment exports to the United States approach $9 billion annually, the reduction promised stability and a continued foothold in its most lucrative market. Even more consequential, provisions allowing duty-free access for garments using American inputs potentially eliminated tariffs on the overwhelming majority of exports.

But that economic logic rested on a political premise that now looks less certain. The US Supreme Court’s ruling stripped away the tariff architecture that had created Washington’s leverage in the first place.

Bangladeshi officials were quick to recognise the implications. Mahbubur Rahman, a senior commerce ministry official, signaled that the agreement had effectively “lost its legal basis,” and policymakers in Dhaka began reviewing its terms.

The original deal was never simply about tariffs. It was about alignment. Washington secured provisions that could force Bangladesh to consult with the United States before entering trade agreements with so-called nonmarket countries, a category that includes China, its largest trading partner.

Bangladesh also agreed to cooperate with American export controls, align regulatory practices in sensitive technologies and expand defense cooperation. These clauses reflected Washington’s broader strategy of embedding its economic relationships within a strategic framework designed to limit China’s influence.

With the tariff threat neutralised, those concessions now risk appearing asymmetrical. Bangladesh may have bound itself to American strategic priorities without receiving the tariff certainty that justified the trade-off. In effect, Dhaka could find itself honoring constraints negotiated under duress even as the duress itself evaporates.

The uncertainty is compounded by Trump’s defiant response. He has vowed to impose a flat 10% tariff on all countries, signaling his determination to maintain protectionism despite the court’s intervention.

Yet even that promise underscores the unpredictability facing Bangladesh. A uniform tariff would erase the preferential advantage Bangladesh had secured through negotiation, placing it on equal footing with competitors while preserving the policy obligations it had already accepted.

This moment of flux exposes a deeper truth about global trade in the age of geopolitical rivalry: agreements built around political contingencies can unravel when those contingencies change. Bangladesh entered negotiations as an export-dependent economy facing the risk of punitive tariffs. Now, with that risk diminished, its incentive to accept stringent conditions weakens.

Yet walking away is hardly simple. The United States remains Bangladesh’s largest export market, and its garment industry – employing millions – depends heavily on American consumers. Export diversification, while often invoked as a solution, remains more aspiration than reality. The importance of the deal persists precisely because Bangladesh has yet to achieve that diversification.

The US Supreme Court’s decision thus presents Dhaka with a paradox. Legally, it weakens the rationale for the agreement. Economically, it does not eliminate Bangladesh’s dependence on American markets. Politically, it complicates Dhaka’s effort to balance relations with Washington and Beijing.

China’s position in Bangladesh’s economy is fundamentally different from America’s. Beijing supplies the industrial machinery and raw materials that underpin Bangladesh’s manufacturing sector, finances infrastructure projects and provides military hardware. Chinese investment stock has surged, and Beijing has already granted duty-free access to most Bangladeshi exports.

Unlike Washington’s relationship, which is rooted in market access and regulatory influence, China’s engagement is embedded in the country’s industrial ecosystem.

The trade deal was widely interpreted as part of Washington’s effort to counter that influence. Jon F Danilowicz, a former US diplomat, framed the objective in pragmatic terms: improving bilateral trade while preventing Bangladesh from drifting further toward Beijing. But the Supreme Court’s ruling threatens to blunt that effort by removing the economic leverage underpinning it.

For Bangladesh’s government, led by Prime Minister Tarique Rahman, the stakes extend beyond trade balances. The country is navigating economic recovery and preparing to graduate from least developed country status.

The new government is also managing the political fallout of a turbulent transition of power. Its ability to attract foreign investment thus depends partly on maintaining stable relations with both superpowers.

That balancing act becomes more delicate if the United States insists on enforcing the agreement’s strategic provisions without offering the tariff relief that justified them. Bangladesh could seek to renegotiate, arguing that the legal and economic circumstances have fundamentally changed.

Alternatively, it could maintain the agreement to preserve goodwill with Washington, calculating that geopolitical stability outweighs immediate economic considerations.

The Supreme Court’s decision also sends a broader signal about the fragility of trade agreements shaped by executive authority. For countries like Bangladesh, which negotiated under the assumption that Trump’s tariffs would endure, the ruling is a reminder that American trade policy can shift abruptly, shaped as much by domestic legal battles as by international diplomacy.

In the short term, the uncertainty may prove as damaging as any tariff. Bangladeshi exporters already report hesitation among American buyers, who are waiting to see how US policy evolves. Investment decisions, supply chain commitments and production plans all hinge on the expectation of stable trade rules.

When those rules are contested in court, the ripple effects extend through factories and ports thousands of miles away.

In the longer term, the episode could reshape how smaller economies approach trade negotiations with major powers. Bangladesh’s experience illustrates the risks of making strategic concessions in exchange for tariff relief that depends on politically contested policies.

Future negotiations may involve greater caution, with countries demanding more durable guarantees before accepting binding commitments.

Faisal Mahmud is a Dhaka-based journalist and analyst