As diplomatic tensions occasionally simmer between Bangladesh and India, a pressing question arises in policy circles and trade forums: Can Bangladesh truly afford a trade war with India? With historical ties, deep economic interdependence, and shared borders, the two South Asian nations are inextricably linked—making the notion of a full-blown trade war both complex and potentially costly.
Economic Interdependence
India and Bangladesh share a robust trade relationship. India is Bangladesh’s second-largest trading partner, with bilateral trade surpassing $18 billion in recent years. India exports a wide range of goods including raw cotton, machinery, fuel, pharmaceuticals, automobiles, and food products. Bangladesh, on the other hand, exports jute, ready-made garments, leather goods, and fish.
Despite Bangladesh enjoying a trade deficit with India—importing far more than it exports—the access to affordable Indian goods and raw materials has been crucial for sustaining Bangladesh’s fast-growing industries, particularly its export-led textile and garment sector.
Why Tensions Are Rising
Trade friction isn’t new between the two countries. Issues such as non-tariff barriers, customs delays, and uneven access to markets have periodically stirred frustration. Recent controversies over border policies, water-sharing agreements, and anti-dumping duties have triggered calls within Bangladesh for a reassessment of trade dynamics.
However, some groups in Bangladesh have floated the idea of imposing retaliatory tariffs or tightening import regulations on Indian goods as a form of economic assertion. While this may sound like a strong political stance, such a move raises the critical question: At what cost?
The Risks for Bangladesh
A trade war would not be a balanced conflict. India, with its $3.7 trillion economy, holds significantly more economic and diplomatic leverage than Bangladesh’s $460 billion economy. More importantly, Bangladesh’s industries are tightly interwoven with Indian supply chains, particularly for raw materials.
For instance, around 70% of the raw cotton used in Bangladesh’s textile industry comes from India. Disrupting that flow—even temporarily—could cripple production lines, delay export orders, and hurt one of the nation’s most vital sectors, which contributes to more than 80% of its export revenue.
Moreover, Bangladesh depends on India for fuel supplies, medicines, and infrastructure components. Trade restrictions could trigger inflation, disrupt transport and manufacturing, and strain already limited foreign exchange reserves.
Strategic Alliances Matter
India has a diversified export market, while Bangladesh’s economy is more vulnerable to regional disruptions. While Dhaka has sought to broaden its trade base through increased ties with China, the EU, and ASEAN, India remains a geostrategic partner—not just economically but also in areas like energy cooperation, security, and regional connectivity.
Any trade war would likely cause ripple effects on multilateral infrastructure projects, such as cross-border energy grids, transit routes, and digital linkages—all of which are key to Bangladesh’s development goals.
The Political Factor
Politically, both countries have reasons to maintain stable relations. India played a pivotal role in Bangladesh’s 1971 liberation, and successive governments have nurtured cooperation in areas like counterterrorism, regional diplomacy, and disaster response.
The current leadership in Dhaka is widely seen as having a pragmatic view toward India, understanding that antagonism might play well to nationalist sentiments in the short term but could backfire economically and diplomatically in the long run.
Alternatives to Conflict
Rather than a trade war, experts suggest trade reform and policy negotiations. Bangladesh could push for more balanced trade agreements, remove non-tariff barriers through diplomatic channels, and invest in local value chains to reduce overdependence on any single country.
Regional forums like SAARC and BIMSTEC could also serve as platforms for structured dialogue and dispute resolution, fostering economic integration instead of fragmentation.
While national pride and economic sovereignty are important, a trade war with India would be a strategic misstep for Bangladesh. The economic costs far outweigh any potential political gain. The wiser course would be to use diplomacy, negotiation, and trade reform to create a more equitable relationship—one that strengthens, rather than undermines, Bangladesh’s long-term economic interests.