New EU Tariffs will End Europe’s Era of Affordable Fashion
Paris Fashion Week dazzles the cameras each season, yet behind the scenes the industry faces a reckoning. Bangladesh, the engine behind much of Europe’s affordable fashion, is about to lose its duty-free access to the EU. That change could hit shoppers and the millions of women who stitch the world’s wardrobes.
This moment could destroy the future of affordable fashion.
Bangladesh is the world’s second-largest exporter of clothing and employs a mostly female workforce of over four million. After decades of growth, its graduation from Least Developed Country (LDC) status is cause for celebration, but this success comes with economic shocks. The loss of trade privileges could shutter factories, wipe out livelihoods, and push up prices across Europe’s high streets.
Under the EU’s Generalised Scheme of Preferences (GSP), the vast majority of Bangladeshi exports are entirely duty-free. But at the end of the LDC transition period, tariffs could rise by as much as 12%. In Canada, they will jump from zero to 16-18%; in Japan, from zero to as high as 12.8 percent. According to the UN, the combined effect could reduce Bangladesh’s annual export earnings by up to 8.7% – billions in lost trade each year.
For a country whose economy depends on exports for growth, that is not a slow bleed but a deep wound. Uniquely, almost three-quarters of Bangladesh’s exports currently benefit from LDC-specific trade preferences.
And the timing of its LDC graduation could not be worse. The US-China trade war, reciprocal tariffs, and the erosion of multilateral trade norms have left emerging economies exposed and fragile. Bangladesh – whose per capita income has risen to almost $2,600, double the threshold for graduation – stands to lose most from this volatility.
While graduation is a sign of progress, replicating Bangladesh’s past formula of relatively low wages and preferential access is no longer an option. Its garment industry is huge, but it’s up against countries including Vietnam, Indonesia, Sri Lanka, and India, which already have strong trade deals in place. Vietnam’s membership of ASEAN, for example, means it can import duty-free raw materials and export finished garments tariff-free to the EU under a free trade agreement.
The EU remains Bangladesh’s single largest export market, accounting for about 48% of its total exports – and nearly 62% when the UK is included. And the EU’s “GSP Plus” scheme, which offers lower tariffs to select countries, currently excludes Bangladesh because its market share massively exceeds the 7.4% threshold.
Higher tariffs will not only push up retail prices across Europe but also force brands to shift sourcing elsewhere, even as sustainability standards tighten. The loss of Bangladesh’s competitiveness could redirect global production toward cheaper, less compliant destinations, undoing decades of progress on safety, gender equality, and labour rights. It’s lose-lose: higher costs for European shoppers and fewer protections for Asian workers.
So, it's clear why the president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has recently requested Muhammad Yunus’ interim government to defer graduation. It’s feasible: Myanmar and Comoros have successfully delayed their LDC graduation, so Bangladesh may be able to do the same, ideally extending the transition period until 2032.
Bangladesh must spend this time investing in modernizing infrastructure such as roads, ports, and outdated customs systems that slow exports and push up costs. It must simplify regulations, improve contract enforcement, and expand trade diplomacy to secure bilateral agreements such as Closer Economic Partnership Arrangements (CEPAs) with key markets including India, Korea, and members of the Gulf Cooperation Council.
Fashion brands must stop treating Bangladesh as disposable when it’s powered global fashion for decades, making possible the very affordability that Western consumers take for granted. Brands should commit to paying fairer prices, establishing longer-term contracts, and investing in the technology and training that will futureproof their supply chains.
At the same time, the EU could also consider other options. A targeted incentive program to reward sustainable and ethical production in Bangladesh, for example, would soften the blow while rewarding the country’s progress in this area.
There are already examples of what this next chapter could look like. Garment manufacturing companies across the country are investing in renewable energy, such as solar arrays atop factories, installing biomass boilers, and pioneering textile-to-textile recycling. These environmental milestones prove that sustainable manufacturing can also be competitive manufacturing.
The risk, however, is that without supportive trade policies, such innovation will no longer pay off. If Bangladesh’s export advantage disappears overnight, factories investing in sustainability may be among the first to close. The global fashion industry will lose not only a supply base, but also a proving ground for ethical progress.
Fashion must act now or pay later. Governments and brands have a window – narrow, but real – to prevent a crisis that would unravel one of the world’s most successful stories of trade-led development. Without decisive action, the very affordability and stability that underpin the global fashion industry will collapse, leaving both workers and consumers to bear the cost.
Taiwo Meghoma is a UK-based Fashion Director and Cultural Diplomat. He has served as Co-Director of Nigerian Cultural Day in Germany, Fashion Director for the Royal African Society’s 120th Anniversary Gala, and consultant for New York Fashion Week.
Photo by Tarek Islam
