Trans-Pacific View | Diplomacy | South Asia

The Bangladesh-US Trade Deal Is a Litmus Test for Dhaka’s Strategic Autonomy

The ART is framed as a market-access deal, but its deeper clauses are geopolitical. For Bangladesh, that represents a challenge to its traditional balancing strategy.

The U.S.-Bangladesh Agreement on Reciprocal Trade (ART), signed just three days before the elections held in Bangladesh in February, provides more structured access to the American market, yet it also introduces substantial constraints on Bangladesh’s ability to maneuver among competing major powers. For a small state that has traditionally pursued a hedging strategy with the United States, China, India, and Russia, the provisions on “non-market” economies, sanctions compliance, and energy procurement may circumscribe rather than consolidate its strategic autonomy. 

The debate over Bangladesh’s trade agreement with the United States has transcended trade policy and increasingly serves as a test of small-state strategic autonomy. From this perspective, the central question is not whether the agreement delivers export gains, but whether its institutional, geopolitical, and security-related provisions limit Bangladesh’s capacity to balance among major powers while maintaining domestic legitimacy. 

Critical voices – including some intellectuals, academics, and left-leaning groups – have portrayed the ART as “a structurally unequal instrument” that “effectively narrowed Bangladesh’s economic sovereignty.” The deal is described with highly-charged language, like “unilateral” and “grossly unequal.” 

The issue has become even more politically charged after reports that the government sought a U.S. waiver to facilitate energy purchases from Russia, a step many interpreted not as pragmatic diplomacy but as evidence of policy dependence and diminished sovereign discretion.

Implementation and coordination of this agreement is thus a major challenge for the new government of the Bangladesh Nationalist Party (BNP), which must downplay its controversial clauses while managing relations with, and reassurance of, the great powers. The BNP government appears to be navigating these constraints through selective implementation, coalition-level scrutiny and carefully calibrated domestic messaging – indicating that Bangladesh retains a degree of its own authority despite pronounced external pressure. 

What the Agreements Includes

Immediately after the BNP’s election win, U.S. President Donald Trump dispatched a congratulatory missive to Bangladesh’s new prime minister, Tarique Rahman. His letter made U.S. expectations clear. Trump exhorted Rahman to expedite implementation of the ART, and to “take decisive action” to finalize defense agreements the United States has long sought to conclude with Bangladesh.

From March 3-5, S. Paul Kapur, the U.S. assistant secretary of state for South and Central Asian affairs, visited Dhaka. Officially, his exchanges emphasized “expanding bilateral trade and investment, enhancing security cooperation, and advancing shared interests in the Indo-Pacific region.”

Bangladeshi media reported that Kapur underscored stringent adherence to the trade agreement’s stipulations as a precondition for amplifying bilateral trade and investment flows. He also addressed broader U.S. priorities in Bangladesh, including improved market access, regional security coordination, and cooperation on irregular migration and counterterrorism. 

Taken as a whole, Washington is positioning the trade agreement not merely as a trade mechanism, but as a component of a more comprehensive architecture of strategic and policy alignment. There’s a clear expectation from the United States that increased cooperation – including on defense and security issues – will follow.

The ART is framed as a tariff-reduction and market-access deal, but its deeper clauses are geopolitical. For Bangladesh, three elements pose particular obstacles to its traditional balancing strategy.

First, the agreement incorporates a clause that prohibits Bangladesh from concluding any trade or economic accords with “non-market economies,” while threatening to reinstate a 37 percent reciprocal tariff on Bangladesh’s exports if such an agreement is signed. The United States considers both China and Russia to be “non-market economies.” 

The cornerstone of Bangladesh’s foreign policy strategy is “friendship to all, hostility to none,” which allows it to flexibly engage with multiple great powers. By wielding punitive tariffs to fend off prospective alignments with Beijing or Moscow, the ART constitutes a structural constraint on hedging.

Second, Articles 4.1 and 4.2 of the ART obligate Bangladesh to cooperate with the United States on export controls, harmonize its strategic-goods regulatory regime, and avoid any measures that might “backfill or undermine” American restrictions. In practical terms, this may compel Dhaka to align with Washington even on politically sensitive third-country issues, including Russia-related sanctions and China-focused export controls, thereby constraining its room to maneuver as a neutral or intermediary actor in the Indo-Pacific. For a small state, such regulatory and security-inflected obligations embedded within trade agreements may further curtail policy autonomy than conventional tariff-centered arrangements.

Third, the ART includes commitments to purchase U.S. liquefied natural gas (LNG) imports, civilian aircraft acquisitions, and expanded defense procurement, nudging Dhaka toward greater energy and security reliance on Washington. For Dhaka, this represents a calculated wager: the country gains access to secure energy supplies and technology, but at the cost of reduced flexibility to recalibrate its external partnerships in the future. The agreement also commits Bangladesh to “limit military equipment purchases from certain countries” – almost certainly to include China and Russia.

Bangladesh has sought to maintain diversified external partnerships, as seen through projects like the Russia-linked Rooppur nuclear power plant and Chinese-funded infrastructure projects. The ART appears to privilege a closer relationship with one power over others by explicitly prohibiting or curtailing certain forms of cooperation between Bangladesh and third countries.

Taken together, these provisions risk shifting Bangladesh away from its soft-balancing, intermediary posture in the Indo-Pacific and in the broader........

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