Donald Trump's "reciprocal tariffs" represent a significant shift in U.S. trade policy, aiming to match the tariff rates imposed by other nations on American goods. This policy, often driven by a blend of economic "fairness" and geopolitical leverage, has led to the imposition of higher import duties on exports from over 60 countries and the European Union. For less developed countries (LDCs) and developing economies, whose garment industries are often critical pillars of their economic and social stability, these tariffs pose multi-faceted challenges.
The analysis reveals a complex and differential impact across LDCs. While some, like India, face exceptionally high cumulative tariffs (e.g., 50% due to geopolitical considerations), others, such as Bangladesh and Vietnam, are subject to lower, albeit still substantial, effective duty burdens (e.g., 35-36.5%). This uneven application is accelerating a re-routing of global apparel supply chains, with U.S. buyers shifting orders away from higher-tariff origins. This creates both challenges and limited opportunities for different LDCs, intensifying competition among them.
The economic consequences include increased costs for U.S. consumers, significant pressure on LDC manufacturers to absorb costs, and potential declines in export volumes and market share for heavily impacted nations. Beyond economic figures, the socio-economic repercussions are profound: widespread job losses, particularly affecting women who constitute the majority of the garment workforce, threaten to reverse decades of progress in poverty reduction and women's empowerment. The uncertainty introduced by these policies also deters foreign direct investment and inhibits crucial industrial upgrading.
This situation underscores the systemic vulnerability of garment-dependent economies to external shocks and the limitations of their leverage in global trade. It highlights the imperative for LDCs to pursue proactive, multi-faceted strategies, including economic diversification and value chain upgrading, supported by coordinated international assistance. The tariffs also strain the multilateral trading system, emphasizing the need for a renewed commitment to rules-based trade to protect vulnerable economies.
Donald Trump's "reciprocal tariff" policy is fundamentally rooted in a principle of "Fairness," asserting that the United States will impose tariffs on imported goods at rates equivalent to those that other countries levy on American products. The stated goal is "No more, no less!".1 This approach has, however, been met with skepticism by numerous trade experts regarding its overall efficacy and fairness.1 The underlying rationale for this aggressive trade stance is to penalize nations that the U.S. perceives as having taken "unfair advantage of the US".2
The implementation of these sweeping tariffs commenced officially, leading to higher import duties on exports from over 60 countries and the European Union.2 President Trump publicly celebrated the anticipated influx of "billions of dollars in tariffs" into the U.S. economy following their enactment.2 A notable instance of this policy's application extends beyond purely economic reciprocity: India faced an additional 25% tariff, bringing its total tariff burden to 50%, a measure explicitly linked to its continued purchase of Russian oil. The White House justified this by citing "national security and foreign policy concerns," demonstrating how tariffs can be leveraged as a tool for broader geopolitical objectives.2 This indicates that the policy is not solely an economic instrument but also serves as a means of foreign policy leverage, adding a layer of risk for exporting nations whose trade relationships might be influenced by their geopolitical stances.
The rollout of these tariffs was not without complications, experiencing several delays from an initial plan in April, then pushing deadlines in July, and finally implementing on August 7.2 This prolonged period of uncertainty itself generated considerable apprehension within global markets. The shift from a promised approach of negotiating 90 trade deals in 90 days to a blanket tariff order 2 underscores a potentially reactive and unpredictable policy environment. This policy volatility introduces significant challenges for global supply chains and long-term investment planning in developing countries, as businesses cannot rely on stable trade environments, making economic forecasting more complex.
The garments and apparel sector constitutes a formidable force in the global economy, accounting for approximately 2% of global GDP. It is a massive employer, providing livelihoods for an estimated 60 to 70 million people worldwide, with a striking two-thirds to three-quarters of this workforce comprising women.3
For many less developed countries (LDCs) and other developing economies, the garment industry serves as a foundational pillar for economic growth, industrialization, and poverty reduction.3 It is particularly vital due to its labor-intensive nature, offering employment opportunities to large numbers of predominantly low-skilled workers.5 This sector's contribution is not merely economic; it has been a powerful driver of social progress, especially for women, by fostering economic independence and improving social indicators.4
The industry operates through a highly integrated global supply chain, where developing countries typically function as suppliers of low-cost inputs and finished goods.6 This deep integration means that shifts in trade policy by major importing nations, such as the U.S., can generate profound and immediate ripple effects across the entire value chain. The reliance of many LDCs on garment exports makes them inherently vulnerable to external trade shocks and sudden shifts in global sourcing strategies.6 This vulnerability is further exacerbated by the often thin profit margins within the garment sector.5 The garment industry's extensive integration into LDC economies, particularly its role in women's employment and poverty reduction, renders these nations exceptionally susceptible to trade shocks like reciprocal tariffs. Such policies, therefore, threaten not just trade figures but the very foundation of economic stability and social progress in these countries.
This report aims to provide a thorough, expert-level analysis of the multi-faceted impacts of Trump's reciprocal tariffs on the garment sector in less developed countries. It will cover the direct economic consequences, the broader socio-economic repercussions, and the influence on global supply chain dynamics, offering insights and policy considerations for affected nations and international stakeholders.
The United Nations formally designates 44 economies as Least Developed Countries (LDCs), a status that grants them preferential market access, aid, and specialized technical assistance.8 This classification is based on three comprehensive criteria:
Complementing the UNCTAD classification, the World Bank categorizes the world's economies annually into four income groups: low, lower-middle, upper-middle, and high. These classifications, updated each July 1, are based on the previous year's GNI per capita using the Atlas method.10 For the current 2026 fiscal year, low-income economies are defined as those with a GNI per capita of $1,135 or less in 2024; lower-middle-income economies are between $1,136 and $4,495; and upper-middle-income economies are between $4,496 and $13,935.10 Examples include Afghanistan and Eritrea as low-income; Bangladesh, Benin, Djibouti, and Egypt as lower-middle-income; and El Salvador, Jordan, and Pakistan as upper-middle-income.11
The comprehensive definitions from UNCTAD and the World Bank reveal that "less developed" is not a monolithic category. Countries vary significantly in their GNI per capita, human capital development, and vulnerability to external shocks. For instance, Bangladesh and Cambodia are on a path to LDC graduation 8, suggesting a higher degree of economic resilience and potentially more diversified economic structures compared to lower-income LDCs. This differentiation is crucial because the impact of reciprocal tariffs will not be uniform. Countries with more diversified economies, stronger institutions, or existing trade agreements might be better equipped to absorb or mitigate the shocks, while those with high economic vulnerability or heavy reliance on a single export sector (as measured by the EVI) will likely face more severe consequences. The analysis must acknowledge this heterogeneity in its assessment.
The U.S. textile import market is significantly supplied by several key nations. In 2024, China was the largest supplier with a 29.6% market share ($36.1 billion), followed by Vietnam (12.7% / $15.5 billion), India (7.96% / $9.71 billion), Bangladesh (6.14% / $7.49 billion), Mexico (4.53% / $5.53 billion), Indonesia (3.28% / $4.0 billion), Cambodia (3.11% / $3.8 billion), Pakistan (2.46% / $3.0 billion), and Honduras (2.05% / $2.5 billion).12
Specific LDCs and developing countries heavily reliant on garment exports to the U.S. include:
The data clearly demonstrates that countries such as Bangladesh, Cambodia, Haiti, Pakistan, Sri Lanka, and Jordan exhibit a high degree of economic dependence on garment exports to the U.S. market. This sector often constitutes a substantial portion of their total exports and GDP (e.g., Bangladesh's garment production accounts for 20% of its GDP 4; apparel makes up over 77% of Haiti's total exports to the U.S. 24; and garments and textiles represent 79% of Jordan's total exports to the U.S. 26). This creates a highly concentrated vulnerability to shifts in U.S. trade policy. For these nations, a tariff increase is not merely a commercial inconvenience but a direct threat to their core economic stability, industrial development pathways, and national foreign exchange earnings. This dependence means that even seemingly moderate tariff increases can have disproportionately large and systemic negative effects on their economies.
Table 2: Economic Contribution and Employment in the Garment Sector of Selected LDCs
Country | UN LDC Status / World Bank Income Group | Total Garment Exports to US (latest available year/period, USD Billion) | Garment Exports to US as % of Total Exports (Approx.) | Garment Sector Contribution to National GDP (%) (Approx.) | Total Employment in Garment Sector (Approx.) | % of Women in Garment Sector (Approx.) |
Bangladesh | Lower-middle income / LDC (graduating 2026) | $7.49B (2023) 14, $4.25B (H1 2025) 13 | 83% (to US & EU) 29 | 20% 4 | 4.5 million 4 | 66-75% (global average) 3 |
Cambodia | Low-income / LDC (graduating 2029) | $3.8B (2024) 12, $12.2B (all products 2023) 15 | >50% (of $10B exports to US in 2024) 30 | 11% 5 | 1 million 5 | >75% 31 |
Vietnam | Lower-middle income | $15.5B (2024) 12, $7.77B (H1 2025) 17 | Top 3 export group to US 32 | Not specified | Not specified | Not specified |
India | Lower-middle income | $9.71B (2024) 12 | Not specified | Not specified | Not specified | Not specified |
Pakistan | Upper-middle income | $3.0B (2024) 12, $5.83B (all exports to US) 19 | 75-80% 18 | 8.5% 33 | 16.8 million (national workforce) / 30% in textile sector 33 | Disproportionately women 33 |
Sri Lanka | Lower-middle income | $0.91B (Jan-Jun 2025) 20 | 40% (of apparel exports to US) 34 | Significant contributor to GDP 35 | 350,000 (direct) + 600,000 (indirect) 34 | 15% of industrial workforce, many women 35 |
Haiti | Low-income / LDC | $0.84B (2022 apparel) 24 | >77% (of total exports to US) 24 | Not specified | 90% of formal employment 36 | Not specified |
Honduras | Lower-middle income | $2.5B (2024) 12, $2.23B (H1 2022 apparel/textiles) 21 | Leading export sector 21 | 7% 21 | 173,000 21 | Not specified |
Nicaragua | Low-income | $1.16B (2023 knit apparel) 22 | 18.81% (knit apparel of total exports) 23 | Not specified | Not specified | Not specified |
Jordan | Upper-middle income | $1.75B (2024 garments/textiles) 26 | 79% (of total exports to US) 26 | Not specified | 77,730 26 | >60% 26 |
Ethiopia | Low-income / LDC | $39.33M (2023 knit apparel) 27 | Not specified | Not specified | 35,000 (Hawassa Industrial Park) 37 | Primarily female 37 |
Lesotho | Low-income | Not specified | Not specified | Not specified | 13,000 (at risk) 28 | Not specified |
The core mechanism of Trump's reciprocal tariffs involves the direct imposition of higher import duties, often as an additional percentage layered on top of existing Most-Favored-Nation (MFN) duties.2 The stated rationale for these tariffs extends beyond mere trade imbalance, encompassing broader geopolitical considerations. A prime example is the 50% tariff imposed on India, explicitly linked to its continued purchase of Russian oil. This demonstrates the use of tariffs as a coercive tool for foreign policy pressure, indicating that the "reciprocity" is not always purely economic but can be influenced by broader political objectives.2 This approach has, however, been met with skepticism by many trade experts who question its overall effectiveness and fairness.1
The widely varying and often very high tariff rates imposed on specific countries (e.g., India's 50% due to Russian oil 38; Syria 41%, Laos/Myanmar 40%, Switzerland 39%, Canada 35% 2) suggest that the application is not a straightforward mirroring of existing tariffs. Instead, it appears to be a flexible and often punitive instrument for exerting economic and political pressure, rather than solely achieving "fairness" in trade balances. This selective and potentially punitive application means that countries perceived as not aligning with U.S. foreign policy objectives or those with limited negotiating power might face disproportionately higher tariffs, regardless of their existing tariff structures on U.S. goods. This adds a critical layer of political risk and uncertainty for LDCs, making their trade environment less predictable and more vulnerable to non-economic factors.
The reciprocal tariffs have created a new, uneven competitive landscape for garment-exporting LDCs and developing countries:
The varying tariff rates imposed on different LDCs and developing countries (e.g., India's 50% versus Bangladesh/Vietnam's effective 35-36.5% versus Haiti's 10% and Nicaragua's 18% within CAFTA) create a new, uneven competitive landscape.17 Countries with relatively lower new tariffs or existing preferential agreements (like CAFTA-DR for Honduras) may gain market share from those with higher tariffs. This suggests that the impact is not a uniform negative for all LDCs; some might even experience trade diversion benefits. This differential treatment will inevitably lead to a re-routing of orders and a structural shift in sourcing strategies by U.S. brands. Buyers will likely move away from higher-tariff origins (like India) towards lower-tariff alternatives (like Bangladesh, Vietnam, or near-shore sites in Central America).12 This intensifies competition among LDCs to attract and retain orders, potentially leading to a 'race to the bottom' on other cost factors.
Table 1: Reciprocal Tariff Rates and Effective Duty Burden for Key LDC Garment Exporters to the US
Country | Reciprocal Tariff Rate (Announced) | Previous MFN Duty (Approx.) | Estimated Effective Total Duty Burden | Specific Rationale/Context for Tariff |
India | 25% + 25% (total 50%) 2 | ~15-17% (pre-existing) | ~50% (cumulative) 38 | Russian oil purchases 2 |
Bangladesh | 20% 13 | ~15-17% (pre-existing) 38 | ~35-36.5% 29 | General reciprocity |
Vietnam | 20% 38 | ~15-17% (pre-existing) 38 | ~35-36.5% 38 | General reciprocity / Negotiated deal 30 |
Cambodia | 36% (reduced from 49%) 30 | Not specified | 36% 30 | General reciprocity / Chinese suppliers reliance 31 |
Pakistan | 29% 18 | Not specified | 29% 33 | General reciprocity |
Sri Lanka | 20% (reduced from 44%) 34 | 0-25% (pre-existing) 34 | 20% + existing levies 34 | General reciprocity |
Haiti | 10% 36 | 0% (due to HOPE/HELP Acts) 36 | 10% 36 | General reciprocity for LatAm/Caribbean |
Honduras | Not specified (CAFTA-DR) | 0% (for non-cotton T-shirts) 40 | 0% (for specific products) 40 | CAFTA-DR agreement |
Nicaragua | 18% 41 | Not specified | 18% 41 | General reciprocity (higher than other CAFTA) |
Jordan | 20% increase 26 | Not specified | 20% increase + previous duties 26 | General reciprocity (despite FTA concerns) 26 |
Syria | 41% 2 | Not specified | 41% 2 | General reciprocity |
Laos | 40% 2 | Not specified | 40% 2 | General reciprocity |
Myanmar | 40% 2 | Not specified | 40% 2 | General reciprocity |
The imposition of these tariffs has triggered immediate and significant reactions across the garment industry. A 35% tariff increase on apparel could translate into approximately a 10% drop in volume if the cost is fully passed on to consumers, though in practice, costs are likely to be split across brands, suppliers, and margins.38
A notable trend is the active re-routing of orders. U.S. clients are already pressuring Indian vendors to relocate production to lower-tariff alternatives, with Bangladesh and Vietnam identified as prime landing spots.38 This aligns with a broader trend of shifting orders away from China due to ongoing trade tensions and tariffs.12 This has led to a diversification of supply chains, with increased sourcing from countries like Vietnam, India, and Bangladesh.12 Major retailers, including Walmart, have reportedly put garment orders from Bangladesh on hold in anticipation of the tariff implementation.42 Similarly, U.S. brands like Gap, Levi Strauss, and VF Corp are adopting a "wait-and-see" approach, leading to a reduction in new orders.29
The unpredictability inherent in this trade policy is a significant deterrent to long-term planning and capital investment in the apparel industry.17 Factories in LDCs face immense challenges in short-term planning due to unknown order volumes and concerns about their ability to pay workers.43 The imposition of reciprocal tariffs is not just causing immediate price adjustments but is accelerating a more fundamental restructuring of global apparel supply chains. This shift, already influenced by factors like rising labor costs in China and broader geopolitical considerations 6, is now being directly driven by tariff differentials. Brands are actively seeking diversification and alternative suppliers, prioritizing those with more favorable tariff treatment or existing trade agreements.12 This means that the global garment industry is undergoing a significant re-alignment, with potential long-term consequences for the geographical distribution of manufacturing. While some LDCs might gain new orders, this also means increased competitive pressure, a constant need for efficiency improvements, and a strategic imperative to move up the value chain to justify higher prices.
The imposition of reciprocal tariffs significantly increases the cost of garment goods in the U.S. market, threatening to reduce demand and disrupt export earnings for affected LDCs.26 For instance, a $10 polo shirt from Bangladesh, previously subject to a 16% duty, could now face a potential 51% price hike, making it less competitive.29 This loss of competitiveness is a critical factor, as higher tariffs make products from affected LDCs less attractive compared to those from countries with lower duties or preferential access.18 India's 50% tariff, for example, sharply alters price equations for U.S. buyers, leading to direct instructions for Indian suppliers to absorb costs or shift production.38
Evidence of export declines is already emerging. Sri Lanka's annual exports to the U.S. are projected to fall from $2.97 billion in 2023 to $1.82 billion in 2026 due to the new tariffs.34 Ethiopia's exports to the U.S. sharply declined by 31.7% in 2023 following the suspension of its AGOA privileges, with apparel imports from Ethiopia dropping by an estimated 42% in the first two months of 2023 alone.37 Pakistan faces an estimated $700 million annual reduction in export earnings due to the 29% tariff.33 In Cambodia, apparel exports dropped 17.4% between January and September 13, and a 36% export tax is anticipated to put hundreds of thousands of jobs at risk.31 Initial estimates for Jordan suggest a 20% to 30% decline in exports could result from the 20% tariff increase.26
Beyond direct declines, the market has seen order holds and reductions. Major retailers, including Walmart, have reportedly put garment orders from Bangladesh on hold in anticipation of the tariff implementation.42 Similarly, factories in Cambodia are cutting hours amid order uncertainty.31 While some countries (e.g., India, Sri Lanka, Pakistan, Ethiopia, Jordan) are clearly facing significant export declines and competitive disadvantages due to higher tariffs 26, others like Bangladesh and Vietnam are positioned to gain from the re-routing of orders away from high-tariff origins, particularly China and India.12 This suggests a complex redistribution of market share rather than a uniform contraction for all LDCs, creating a 'winner-takes-some' scenario among LDCs, intensifying competition and potentially leading to a concentration of orders in a few favored low-tariff or strategically located countries. This could exacerbate inequalities among developing nations.
The apparel industry generally operates on thin margins, and the imposition of tariffs will inevitably lead to a compression of profit margins for LDC manufacturers. This necessitates renegotiations that aim to split the tariff load, often involving partial FOB (Free On Board) reductions, tighter payment terms, and a higher bar for on-time, in-full delivery.5 Suppliers operating on already paper-thin profit margins (e.g., Bangladesh averaging just 6%) may even be forced to operate at a loss.5 Furthermore, tariffs are often levied on components and raw materials, pushing up costs for manufacturers, particularly in complex global supply chains where goods cross borders multiple times.31
For Bangladesh, the 35% tariff directly undermines its competitive edge in the U.S. market.29 Without a free trade agreement with the U.S., Bangladesh already faces stiff competition, and the tariff exacerbates this challenge.29 Pakistan's competitiveness is further eroded by its high input costs, including energy prices, erratic utility supply, and inefficient infrastructure, which already give competitors like China and Bangladesh a decisive advantage.33 Nicaragua's 18% tariff, significantly higher than the 10% for most other CAFTA countries, will make it lose competitiveness compared to its regional peers.41
The impact of tariffs is not solely determined by the tariff rate itself. Pre-existing domestic challenges such as high input costs (energy, utilities, infrastructure in Pakistan 33), infrastructure bottlenecks (Bangladesh 17), and reliance on imported raw materials (Bangladesh 42) can significantly amplify the negative effects of tariffs. Conversely, countries with existing trade agreements (CAFTA-DR for Honduras and Nicaragua, though Nicaragua's 18% is a disadvantage within CAFTA) or strategic advantages like vertical integration (Honduras 21) are better positioned to mitigate the impact or even gain. This highlights that LDCs need to address internal structural issues and pursue comprehensive trade strategies (beyond just tariff negotiations) to build resilience against external shocks.
The U.S.-China trade war and the recent reciprocal tariffs have significantly accelerated the diversification of global supply chains. U.S. importers are actively reducing their dependence on China and increasing sourcing from countries like Vietnam, India, and Bangladesh.12 This strategic shift in demand towards South Asian countries is a direct consequence of tariff policies.12
Vietnam, in particular, has emerged as a key beneficiary of orders shifting away from China.17 Beyond Asia, near-shore sites like Mexico and Central American countries, including Honduras and Nicaragua, are gaining importance due to their geographical proximity to the U.S. market and existing trade agreements.21 Honduras, for instance, is strengthening its position as a "nearsourcing partner" for the U.S. apparel industry, benefiting from low or zero tariffs under CAFTA-DR.21
This diversification also influences the category mix of products sourced from different LDCs. Buyers may increasingly focus countries like Bangladesh on higher-value products such as denim, sweaters, and value-added knits, where compliance and quality credentials can justify higher average selling prices. Conversely, ultra-price-sensitive basics like t-shirts may drift to the very lowest-cost origins or see scaled-down production.38 While the diversification away from China presents an "opportunity offset" for some LDCs 12, it simultaneously intensifies competition among them. This means that even countries receiving new orders will face immense pressure to maintain competitive pricing, improve efficiency, and potentially invest in higher-value production to retain buyers. The "race to the bottom" for price-sensitive categories might continue or even accelerate in some segments. LDCs must strategically position themselves by focusing on niche markets, improving quality, compliance, and efficiency, and investing in automation and innovation.13 Simply having lower tariffs may not be sufficient for sustained growth.
A significant consequence of the tariffs is their potential to deter foreign direct investment (FDI) and hinder industrial development in LDCs. A contraction in garment exports directly risks destabilizing ancillary industries (such as textile mills, packaging, and transportation) and deterring crucial foreign investment.29 The pervasive uncertainty over tariff levels may cause factories to halt or reduce investments in improving working conditions and upgrading facilities.43 This is particularly problematic as the garment industry has historically served as a stepping stone for industrialization in many LDCs.
For long-term resilience, countries like Bangladesh recognize the imperative to diversify their economies beyond garments, expanding into sectors such as pharmaceuticals, IT, leather goods, and agro-products, to cushion against future trade shocks.29 Within the garment industry itself, investing in higher-value products and strengthening local textile production could enhance resilience.29 The tariffs, by increasing uncertainty and pressuring margins, risk undermining the very foundation of industrial development in these countries: stable foreign direct investment and long-term planning.17 If this sector becomes less attractive for investment or faces significant contraction, it could derail broader economic diversification efforts and potentially trap countries in lower-value activities or informal economies. This necessitates a proactive approach from LDC governments to create a more stable and attractive investment climate, perhaps through bilateral trade deals, improved infrastructure, and supportive industrial policies, to retain and attract FDI despite tariff challenges.
The garment industry is a massive global employer, with two-thirds to three-quarters of its 60-70 million workers being women.3 This sector has been a powerful catalyst for women's development and empowerment in countries like Bangladesh, where it employs approximately 4 million people, mostly women from rural areas.4
The imposition of tariffs and the resulting economic pressures pose a severe threat of widespread job losses, disproportionately affecting women who often rely on garment work as their primary source of income.29 Specific estimates highlight this risk:
The disproportionate impact of job losses on women in the garment sector threatens to reverse decades of progress in women's economic empowerment. This is not just about economic hardship but risks a resurgence of traditional gender roles and increased child marriage rates, as observed during previous economic disruptions.29 This severe, gendered impact could cripple entire families and reverse progress in gender equality, education, and child welfare.33 If formal factories are forced to close, jobs may shift to the informal sector, where workers typically have fewer protections and face greater precarity.43 This transforms an economic policy into a potential human rights and development crisis, undermining a key driver of social progress in these nations.
The garment industry has historically been a significant driver of poverty reduction in developing countries.3 However, widespread job losses in this sector due to tariffs could reverse decades of socioeconomic progress in poverty reduction.42 The economic contraction and widespread job losses resulting from the tariffs can exacerbate existing debt burdens in LDCs and significantly heighten the risk of social unrest and political instability. For instance, more than half of Cambodian households are in debt to formal lenders.31 In Pakistan, the export shock is particularly detrimental to poverty reduction efforts, given that the national poverty rate climbed to 25.3% in 2024, pushing 13 million more citizens below the poverty line. Job losses are expected to further deepen this crisis.33
The International Monetary Fund (IMF) previously warned that high U.S. tariffs could reduce Sri Lanka's exports and shrink its GDP by up to 1.5% below baseline projections, predicting a rise in unemployment.34 The initial 44% tariff had the potential to push Sri Lanka from an already fragile position into an even deeper economic and financial crisis.35 In Ethiopia, job loss due to trade shocks led to extreme poverty nearly doubling for affected workers.37 Furthermore, a decline in foreign exchange earnings could limit a country's ability to import essential goods like fuel and food, further straining its economy.29 The impact extends beyond the garment sector, with a contraction risking the destabilization of ancillary industries (textile mills, packaging, transportation).29 Small and Medium Enterprises (SMEs) in allied industries will also suffer, and ripple effects could reach agriculture due to falling cotton demand.33 This highlights a dangerous feedback loop where external economic shocks from tariffs worsen pre-existing vulnerabilities, pushing populations into deeper financial distress and increasing the likelihood of broader societal instability and political fragility.
Beyond direct economic and employment impacts, the tariffs pose broader social and development challenges. The intense competition for foreign investment can leave garment sector workers vulnerable to exploitation.4 Pre-existing challenges in the industry include inadequate safety procedures and low wages, which have historically led to tragic incidents like the Rana Plaza collapse in Bangladesh.5
If formal factories are forced to close due to tariffs, jobs may shift to the informal sector, where workers typically have fewer protections and face greater precarity.43 The pressure from tariffs and the intensified competition for orders could lead to a significant rollback of progress on labor standards and worker safety in LDCs, as factories prioritize cost-cutting to maintain competitiveness in a challenging market. 43 states that "factories stop investing in improving working conditions, which could affect occupational safety and health" due to tariff uncertainty. The added pressure from tariffs could exacerbate this, forcing factories to compromise on hard-won labor rights and safety improvements to absorb costs and retain orders. This could undermine UN Sustainable Development Goals (SDGs) related to gender equality (Goal 5) and decent work (Goal 8).26 Rising poverty and unemployment also heighten the risk of social unrest, crime, and political instability.33 The loss of income means children may not be able to go to school and aging parents may not be able to afford medicine 45, impacting human capital development.
The current wave of reciprocal tariffs bears striking resemblances to historical protectionist measures. Historically, wealthier countries employed quotas, such as those under the Multifibre Arrangement (MFA), to restrict textile and clothing imports from developing countries.47 The expiration of the WTO's Agreement on Textiles and Clothing (ATC) in 2005, which lifted these quotas after over 40 years, was anticipated to yield substantial gains for developing countries, including an estimated $24 billion in income and $40 billion in export revenue, potentially creating 27 million jobs.49 This liberalization led to a significant shift of apparel production and sourcing to China and other Asian countries due to lower labor costs.6
General economic theory and historical experience demonstrate that protectionist measures, while intended to benefit domestic producers, ultimately increase the price of imported goods. This cost is borne by consumers through higher prices and by the broader economy through a loss of income and employment opportunities in more efficient industries.47 Such measures tend to become entrenched once adopted, as benefiting sectors develop a vested interest in their continuation.47 Furthermore, trade restrictions have direct adverse effects on exporting countries, limiting their ability to fully exploit their competitive advantage and find substitute outlets, especially in the short run.47 Trump's reciprocal tariffs, despite their "fairness" rhetoric, function as a protectionist measure similar to historical quotas by increasing import costs and restricting market access.47 The economic theory and historical experience suggest that such measures lead to higher consumer prices, reduced efficiency, and harm to exporting countries, particularly developing ones that struggle to find alternative markets. This means the current tariff regime risks repeating past mistakes of protectionism, hindering global trade liberalization efforts and disproportionately impacting the most vulnerable economies, potentially leading to increased global inequality.50
Developing economies are inherently dependent on exports and foreign investments, rendering them particularly vulnerable to trade interruptions and "trade wars".7 As Nobel laureate Joseph Stiglitz observes, while trade wars harm all economies, developing nations bear the most severe effects due to their high reliance on exports and foreign investments.7 Uncertainty arising from such conflicts causes significant problems, leading to factory closures, job losses, and economic slowdowns.7
Many LDCs also face inherent challenges such as limited economic diversification, infrastructure deficits, and institutional weaknesses.7 The imposition of tariffs acts as an additional external shock that compounds these existing vulnerabilities, making it harder for them to adapt and sustain economic progress. This can lead to a vicious cycle where economic instability exacerbates social problems and vice versa. Furthermore, the sudden surges in industrialization that might occur from supply chain shifts can overwhelm local infrastructure and resources. This can lead to increased costs, inefficiencies, and a heightened risk of environmental degradation and worker exploitation, as developing nations often lack the institutional capacity or regulatory mechanisms to accommodate such rapid industrial growth.7 This underscores the need for greater international cooperation and targeted support for LDCs to build resilience, diversify their economies, and strengthen their institutional frameworks, rather than imposing measures that further destabilize them.
The unilateral imposition of reciprocal tariffs, potentially violating existing trade agreements (e.g., the Jordan-U.S. Free Trade Agreement 26), places significant strain on the multilateral trading system governed by the World Trade Organization (WTO). Critics argue that WTO policies have historically failed to adequately protect developing nations and, in some cases, have allowed richer countries to maintain high import duties, blocking imports from developing countries (e.g., clothing).51 Such unilateral actions could be perceived as breaches of international trade rules and could open the door for affected countries to file formal complaints with the WTO, potentially triggering retaliatory measures from trade partners.26
International financial institutions like the IMF and World Bank have voiced concerns about the impact of trade wars. The IMF has warned that trade protectionism offers no genuine solution to underlying industrial problems and often exacerbates existing difficulties.47 It notes that reduced access to foreign markets hinders developing countries' ability to fully partake in the benefits of increased international trade.47 The IMF, for example, warned that high U.S. tariffs could reduce Sri Lanka's exports and shrink its GDP.34 Joseph Stiglitz's observation that "trade wars in a globalised world are like playing with fire—everyone gets burned, but developing economies suffer the most" 7 encapsulates the disproportionate impact. The current tariff regime challenges the very principles of multilateralism and rules-based trade that LDCs often rely on for fair market access. The erosion of this system makes LDCs even more vulnerable to the unilateral actions of larger economies. UNCTAD, for its part, advocates for improved preferential access, flexible conditions, and rules of origin for LDCs to help them compete effectively in a liberalized trade environment.49
Affected countries are actively engaging in diplomatic efforts to secure tariff relief or exemptions. Bangladesh, for instance, undertook diplomatic outreach to request a suspension of the tariffs.42 Sri Lanka's government efforts were instrumental in securing a reduction of its initial 44% tariff to 20%.17 Jordan's Prime Minister has met with U.S. officials to discuss the tariffs, requesting updates to older trade agreements to facilitate market access and encouraging more direct U.S. investment.46 Pakistan also recognizes the need for diplomatic engagement with the U.S. to seek tariff relief or exemptions, especially for its value-added textile categories.33
Some countries have successfully negotiated limited trade deals to reduce their tariff burden.2 Vietnam, for example, managed to strike a deal limiting its tariff to 20%.30 Beyond diplomacy, domestic reforms are crucial. Pakistan needs a fast-tracked reform package to reduce high input costs, improve the ease of doing business, and potentially introduce its own export subsidies.33 Haiti's economy minister has called for international cooperation alongside national reforms to stabilize the domestic economy in the face of U.S. tariffs.36 Relying solely on the U.S. reversing its policy is insufficient. LDCs must pursue multi-pronged strategies that combine diplomatic efforts to mitigate tariff impacts with robust domestic reforms aimed at improving competitiveness (e.g., reducing input costs, improving infrastructure, streamlining business processes). Diversifying trade partners beyond the U.S. is also crucial.6 This necessitates strong political will and coordinated action within LDC governments to implement difficult but necessary structural reforms, alongside agile diplomatic strategies.
To counter the tariff burden and maintain competitiveness, the garment industries in LDCs are compelled to move towards greater vertical integration and higher-value production. Factories need to transform the "duty shock" into a catalyst for faster development, tighter compliance, and the production of higher-value products.38 For Bangladesh, this means focusing on denim, sweaters, and value-added knits, where wash, embellishment, and compliance credentials can justify higher average selling prices.38
Long-term resilience also demands broader economic diversification beyond garments. Bangladesh, for example, must expand sectors like pharmaceuticals, IT, leather goods, and agro-products to cushion against future trade shocks.29 Within the garment industry, investing in local textile production could enhance resilience by reducing reliance on imported raw materials.29 Furthermore, supportive policies are needed to maintain momentum, expand Man-Made Fiber (MMF)-based production, and invest in automation, innovation, and infrastructure.13 Vietnam's strategy to diversify trade, including through Free Trade Agreements (FTAs) like CPTPP and RCEP, will also help expand exports to other markets.17 This push for resilience through vertical integration and value addition requires significant capital investment, technological upgrading, and skilled labor development, which may be challenging for many LDCs operating on thin margins. International support for such initiatives becomes even more critical.
The systemic risks and limited internal capacity of many LDCs to absorb trade shocks and diversify their economies underscore the crucial need for targeted international development assistance and trade facilitation measures. Financial assistance and development funds are vital to strengthen supply capacity and modernize technologies in these countries.49
For displaced workers, timely and well-designed job-loss support programs can significantly cushion the economic blow and facilitate reemployment.37 Workers themselves value job-loss insurance, indicating a strong demand for such protection and the feasibility of contributory models even in low-income settings.37 International organizations, such as the International Labour Organization (ILO), have a critical role in monitoring and ensuring that factories continue to invest in improving working conditions and occupational safety, despite the economic pressures and uncertainty introduced by tariffs.43 The socio-economic fallout (job losses, poverty, gender inequality) necessitates a robust international response beyond just trade policy, including financial assistance for industrial upgrading, social safety nets, and continued advocacy for labor rights.29 This situation serves as a critical test for the international community's commitment to sustainable development goals and poverty reduction in the face of rising protectionism.
Donald Trump's reciprocal tariffs have introduced a profound and complex set of challenges for the garment industry in less developed countries. The analysis demonstrates that these tariffs are not merely economic adjustments but are deeply intertwined with geopolitical objectives, leading to an unpredictable and often punitive trade environment. The primary impacts include increased costs for U.S. consumers, significant pressure on LDC manufacturers to absorb costs, and volatile shifts in export volumes and market share. While some LDCs, particularly those with relatively lower tariff burdens or existing trade advantages, may benefit from order re-routing away from more heavily impacted nations, the overall landscape is one of intensified competition and reduced profitability.
The socio-economic repercussions are particularly severe. Widespread job losses, disproportionately affecting women, threaten to reverse decades of progress in poverty reduction, women's empowerment, and broader human development indicators. The inherent vulnerabilities of garment-dependent economies are exacerbated, increasing risks of debt, social unrest, and a potential erosion of labor standards as manufacturers strive for cost-competitiveness. The uncertainty surrounding these policies also acts as a significant deterrent to foreign direct investment and crucial industrial upgrading, hindering long-term diversification efforts.
This situation highlights the urgent imperative for LDCs to adopt proactive, multi-faceted strategies. This includes agile diplomatic engagements to seek tariff relief or exemptions, coupled with robust domestic reforms aimed at reducing input costs, improving infrastructure, and streamlining business processes. Crucially, LDC industries must accelerate their transition towards higher-value products, embrace automation, and strengthen local production linkages to build resilience against future trade shocks.
The current tariff regime also places significant strain on the multilateral trading system. Unilateral actions that potentially violate existing trade agreements undermine the rules-based order that LDCs often rely upon for fair market access and dispute resolution. A renewed commitment to multilateralism and strengthening international trade organizations is essential to ensure fair trade practices and protect the interests of vulnerable economies. Ultimately, navigating this complex global trade environment will require sustained efforts from LDC governments, adaptable industry players, and coordinated international support to safeguard development gains and foster long-term economic stability.