Export Market Diversification in a Shifting World
Founder & CEO, Trade & Investment Bangladesh (T&IB)
Executive Director, Online Training Academy (OTA)
Secretary General, Brazil Bangladesh Chamber of Commerce & Industry (BBCCI)
The current era of trade wars and geopolitical fragmentation has dramatically reshaped global trade flows. The post-1945 system of open, rules-based trade is fragmenting, with the U.S. effective tariff rate soaring to over 18%, a level not seen since the Great Depression. Protectionist policies, including widespread industrial subsidies and the use of tariffs as geopolitical tools, are increasingly common, particularly in strategic sectors. Trade tensions are intensifying between major powers like the U.S. and China, while trade alliances are being realigned. Notably, the world is seeing the emergence of two economic blocs: a U.S. led bloc encompassing allied nations, and a Chinaโcentric bloc of resource-rich partners. In Asia, manufacturing sectors are under stress Japan (PMI 49.7), South Korea (48.3), and Taiwan are contracting highlighting vulnerability to tariffs and competitive entry from lower-cost regions. These developments underscore that global trade is no longer unified, but dynamically reshaping along geopolitical fault lines.
In a world where trade shocks can drastically impact a few key markets, export diversification has become essential not optional for economies like Bangladesh. Today, Bangladeshโs export basket remains highly concentrated: Ready-Made Garments (RMG) account for approximately 82% of national export earnings, and some studies even cite figures as high as 85%. This level of concentration makes Bangladesh four times more export-dependent than the average developing country. While RMG exports fueled impressive growth and employment creating over 4 million jobs the narrow focus leaves the economy exposed to disruptions such as tariff shocks, changing buyer preferences, and global supply chain shocks. Without diversification, Bangladesh risks severe setbacks to economic resilience and growth momentum.
For Bangladesh, moving beyond garments is not just desirable itโs critical for long-term stability and growth. Strategic national plans, including Vision 2041 and the countryโs Five-Year Plans, explicitly highlight the need for expanding export sectors beyond apparel. Bangladeshโs export earnings stood at around $60.5 billion in 2024, still heavily weighted toward clothing despite emerging activities in pharmaceuticals, leather goods, jute products, and processed foods. Expanding into light engineering, ICT services, agro-processing, and pharmaceuticals could help cushion the economy against volatility, raise income levels, and create new competitive advantages. Thus, export diversification emerges not only as a buffer against external shocks but also as a strategic pivot toward sustainable, inclusive growth.
ย
2. The Risks of Overdependence on Few Markets
Many economies suffer from overdependence on a narrow set of export markets or products, creating severe vulnerabilities. Australian agriculture is a stark example: at one point, China accounted for about 70% of Australia’s cotton exports, and the abrupt imposition of Chinese import restrictions caused massive disruptions. Australia also faced bans on coal and lobsters, with exports dropping and prices tumbling for example, lobster prices fell from USโฏ$250 to just USโฏ$100. Similarly, in global trade, McKinsey research shows that around 40% of trade in goods relies on just three or fewer supplier countries highlighting a broader trend of concentrated trade relationships, even when alternative suppliers exist. Another powerful case is U.S. agriculture. Between 2017 and 2018, China’s share of soybean imports from the U.S. plummeted from 62% to just 18%, leading to an estimated USโฏ$24 billion in lost revenue, planting reductions, and bankruptcies among farmers. These examples illustrate how reliance on just one or a handful of export destinations or commodities can expose an economy to sudden shocks, loss of earnings, and political risk.
Trade wars, volatile tariffs, and sanctions disproportionately hit export-dependent countries. For instance, the Trump-era trade policies have created near-daily shifts in tariff rates from 10% minimum on general goods to 25% on steel, aluminum, and cars making planning nearly impossible for exporters. UK Export Finance described this uncertainty as โharder to navigate than the COVIDโ19 pandemic,โ forcing urgent support mechanisms, including over ยฃ20โฏbillion in financing guarantees. In Indonesia, U.S. tariffs on rubber and textiles have plunged domestic manufacturers into crisis. A major textile firm, Sritex, reportedly shut down operations entirely, as cheaper Chinese goods flooded markets and eroded margins. Meanwhile, economists warn that sweeping U.S. tariffs could spark a global recession, with key manufacturing hubs Vietnam, Bangladesh, and Cambodia particularly at risk due to heavy reliance on U.S. markets. Growth could slow, jobs could vanish, and global supply chains may fracture permanently. These real-world effects underscore how vulnerable exporters face amplified economic harm when policy volatility undermines trade predictability.
The COVIDโ19 pandemic, coupled with trade wars and conflict, has taught painful but vital lessons about resilience and risk diversification. One comprehensive study by Bruegel found that while shocks like the pandemic and Russiaโs invasion of Ukraine caused severe but relatively short-lived supply chain disruptions, the more protracted U.S.โChina trade war had even deeper structural effects on value chain configuration. Trade patterns during the pandemic also shifted dramatically. According to UNCTAD, when COVIDโ19 struck, African and Latin American exports slumped sharply delayed further by collapsing commodity prices. While trade rebounded in 2021, small island developing states, heavily reliant on tourism and few export streams, were left behind. Moreover, a detailed gravity-model analysis revealed that countries experiencing severe COVIDโ19 outbreaks and strict lockdowns saw up to 13% reductions in imports from China emphasizing how health crises impact both demand and supply channels.
Together, these events illustrate that concentrated trade exposure isnโt just economically risky itโs unsustainable. Diversification across markets, products, and modes is critical to absorb shocks, adapt operations, and safeguard long-term growth.
3. Emerging Opportunities in New Geographies
As global trade dynamics shift, regions like Latin America, Africa, and Eastern Europe are increasingly drawing attention as promising new avenues for export diversification. In Latin America, Bangladesh’s current trade volume remains modest just USโฏ$621 million in fiscal year 2022โ2023 especially when compared with Indiaโs $50 billion exports to the region. Meanwhile, Africa presents a vast and growing opportunity: the African Continental Free Trade Area (AfCFTA) brings together 54 countries into a single market of about 1.4 billion people with a combined GDP of USโฏ$3.4 trillion. Projections suggest the AfCFTA could raise Africaโs exports to the world by 32% by 2035 and boost foreign direct investment by 111โ159%. Though Eastern Europe wasn’t directly referenced in the latest search results, similar principles apply its members benefit from relatively open markets, proximity to EU economies, and evolving industrial capacities, making it a strategic alternative worth exploring. For exporters, these regions offer not just geographic diversification, but the chance to tap into new consumer segments and growth trajectories.
Robust growth in the middle-class population across Asia and Africa is reshaping global demand and opening up lucrative markets for exporters. In Asia, an estimated 2 billion people were classified as middle class in 2020; this is projected to climb to 3.5 billion by 2030, making Asia home to two-thirds of the global middle class. Meanwhile, Africa is experiencing parallel momentum: consumer expenditures are forecasted to double from 2015 levels, reaching USโฏ$2.5 trillion by 2030; in just five major markets Nigeria, Egypt, South Africa, Morocco, and Algeria Middle East and North African Development Bank estimates identify 56 million middle-class households wielding approximately USโฏ$680 billion in disposable income. This rapidly expanding consumer base, with growing purchasing power and demand for diverse goods and services, presents exporters with a compelling target: from everyday essentials to lifestyle and digital products, these evolving markets offer fertile ground for expansion.
Regional trade blocs like RCEP, Mercosur, and AfCFTA represent powerful levers for export diversification, offering streamlined market access and collaborative frameworks. RCEP anchored by ASEAN and several Asia-Pacific economies accounts for nearly half of the worldโs manufacturing output, with member countries ranging widely in their export-to-GDP ratios: less than 20% in Indonesia, and over 66% in Cambodia, Malaysia, Singapore, Thailand, and Vietnam. These economies dominate manufacturing and offer integrated supply chain opportunities for new exporters. In Latin America, Mercosur and initiatives like the Pacific Alliance (the โPacific Pumasโ: Chile, Colombia, Mexico, Peru) block are paving the way for trade liberalization; for example, the Pacific Alliance eliminated tariffs on 92% of intra-bloc trade. Meanwhile, in Africa, the AfCFTA carries immense promise: intra-continental trade currently stands at just 18%, but could increase by more than 50% by the end of 2025 and add some USโฏ$450 billion to Africaโs GDP by 2035. Together, these blocs offer exporters easier entry, cost reductions, and strategic footholds in rapidly developing regional markets.

4. Sectoral Diversification: Moving Beyond the Traditional
Bangladeshโs economy has been built around its Ready-Made Garments (RMG) sector, which contributes about 82โ85% of total export earnings and employs more than 4 million workers, mostly women. While this industry has been the backbone of the nationโs growth, such a narrow export concentration poses significant risks. Global buyers are increasingly demanding compliance with ESG (environmental, social, and governance) standards, and any failure to keep pace could threaten market access. Furthermore, rising competition from Vietnam, Cambodia, and Ethiopia is squeezing Bangladeshโs cost advantages. A heavy dependence on a single sector leaves the economy highly vulnerable to external shocks such as tariff hikes, supply chain disruptions, or sudden demand drops in Europe and the U.S., which together account for over two-thirds of Bangladeshโs apparel exports. This overdependence not only risks stagnation but also constrains the countryโs ambition to achieve upper-middle-income status by 2031.
To mitigate these vulnerabilities, Bangladesh has strong potential to expand into other promising sectors. Agro-processing can leverage the countryโs large agricultural base, tapping into growing demand for processed foods and halal-certified products. The pharmaceuticals sector, which already exports to over 150 countries, could expand further by capitalizing on patent expirations and low-cost production capacity. ICT and software services are emerging as fast-growing export areas, with Bangladesh ranking among the top five global freelancing markets, generating over $600 million annually. Light engineering, valued at around $3 billion domestically, can become an export driver by supplying machinery, tools, and spare parts to regional markets. Traditional sectors like jute and leather also have revival potential through value-added products and eco-friendly branding. Moreover, renewable energy products such as solar accessories can align with global green demand. Together, these industries represent a diversified export base that can strengthen resilience and boost foreign exchange earnings.
Beyond goods, the service sector offers enormous untapped potential for Bangladeshโs export diversification. The global digital economy has created space for freelancing, IT outsourcing, and software development, where Bangladesh already holds a competitive edge due to its large pool of young, English-speaking tech talent. Platforms like Upwork and Fiverr show that over 650,000 Bangladeshi freelancers are active worldwide, positioning the country as a top outsourcing hub. Beyond ICT, there is growing potential in consultancy services particularly in business process outsourcing, compliance advisory, and financial services. The logistics sector, too, has exportable value as Bangladesh develops port and transport infrastructure to serve as a regional hub for South Asia. Expanding service exports not only complements goods trade but also generates high-value employment, diversifies forex earnings, and positions Bangladesh in global value chains beyond manufacturing.
5. Innovation, Technology, and Digital Trade
E-commerce platforms and B2B marketplaces have become game changers in enabling exporters especially SMEs to access non-traditional markets with relatively low entry costs. Platforms like Alibaba, Amazon, eBay, and TradeIndia allow Bangladeshi producers to showcase goods globally without depending solely on middlemen or trade fairs. For example, Bangladeshโs e-commerce exports have begun to rise steadily, with ICT and light consumer goods finding traction among diaspora communities and niche buyers abroad. These platforms break geographical barriers, offering instant exposure to buyers in Latin America, Africa, and Eastern Europe regions where Bangladesh has limited physical trade presence. With proper branding, certification, and logistics support, e-commerce marketplaces can help diversify export destinations and promote โMade in Bangladeshโ products far beyond traditional garment buyers in the U.S. and EU.
Secure, efficient, and low-cost transactions are critical for expanding exports, and here fintech and digital payment systems play a pivotal role. Traditional banking channels often pose challenges for SMEs due to high fees, delays, and compliance burdens. Fintech innovations such as mobile banking (bKash, Nagad), cross-border remittance platforms, and blockchain-based trade finance are revolutionizing the way exporters receive payments. For example, World Bank data shows that digital financial inclusion in Bangladesh has grown rapidly, with over 50% of adults using mobile financial services in 2023. On a global scale, blockchain-enabled trade settlement reduces fraud risks and ensures transparency, particularly in markets where trust deficits are high. By integrating fintech solutions with export processes, Bangladesh can empower SMEs to securely transact with buyers in emerging regions, thereby reducing dependency on traditional Western financial intermediaries.
In todayโs competitive trade environment, technology-enabled supply chains are crucial for maintaining cost efficiency, reliability, and resilience. Tools such as AI-driven demand forecasting, IoT-enabled inventory tracking, and blockchain-based logistics monitoring are increasingly used by leading exporters worldwide to reduce delays and improve transparency. For Bangladesh, where supply chain inefficiencies add an estimated 8โ10% to export costs, adopting these technologies could significantly improve competitiveness. Digital customs, smart warehousing, and multimodal transport tracking would reduce lead times and enhance trust among global buyers. Moreover, green technologies such as energy-efficient machinery and sustainable packaging can help align supply chains with ESG standards, a key requirement for entering premium markets in Europe and North America. By embracing a tech-driven supply chain model, Bangladeshi exporters can position themselves as reliable partners in the global trading system while also exploring new markets that demand quality, compliance, and efficiency.
6. Trade Facilitation and Policy Reforms
One of the biggest obstacles to export competitiveness in Bangladesh is the delay and inefficiency in customs and logistics. According to World Bankโs Logistics Performance Index 2023, Bangladesh ranked 100th out of 139 countries, reflecting significant challenges in clearance procedures and infrastructure bottlenecks. Exporters often face long dwell times at ports, sometimes averaging 3โ5 days, compared to less than 24 hours in advanced trading hubs like Singapore. This not only raises costs but also makes Bangladeshi goods less attractive in time-sensitive markets. A shift toward digitalized customs clearance, paperless trade, and single-window systems could dramatically reduce these delays. Complemented by investments in multimodal logistics integrating road, rail, and waterways Bangladesh could cut lead times by half, making diversification into competitive markets like Latin America or Africa more feasible.
High operational costs remain another barrier to export diversification. Exporters in Bangladesh face elevated expenses due to unreliable power supply, port congestion, outdated infrastructure, and multiple layers of regulatory approvals. Studies estimate that logistics and compliance costs add 8โ10% to the total export price of Bangladeshi products, compared to an average of 4โ5% in regional competitors like Vietnam. For SMEs in particular, these costs can be prohibitive, preventing them from entering new global value chains. Targeted reforms such as streamlining VAT refunds, simplifying tax codes, and digitizing licensing procedures could sharply lower business costs. Moreover, affordable access to credit, particularly through specialized export financing schemes, would empower businesses to scale operations and experiment with new markets. Lowering these barriers is not just a matter of efficiency but a strategic move to unlock competitiveness in non-traditional export sectors like pharmaceuticals, ICT, and agro-processing.
Trade agreements are critical for securing market access and reducing tariff and non-tariff barriers in new destinations. Bangladesh has long depended on preferential schemes like the EUโs GSP, which are set to change after the countryโs LDC graduation in 2026. Without proactive trade diplomacy, exporters risk losing preferential duty-free access worth billions of dollars annually. Negotiating bilateral Free Trade Agreements (FTAs) with key partners such as Japan, India, and Brazil, and participating actively in multilateral frameworks like RCEP or AfCFTA, would help Bangladesh sustain competitiveness. For example, RCEP alone covers 30% of global GDP and offers streamlined access to Asian markets, while AfCFTA opens the door to a $3.4 trillion African market. By securing favorable agreements, Bangladesh can both offset the risks of trade wars and position itself as a trusted player in diversified global markets.

7. Branding โMade in Bangladeshโ Globally
In global markets, credibility is currency. For Bangladesh to expand beyond its traditional garment exports, building trust with international buyers is critical. Compliance with international standards such as ISO certifications, labor rights regulations, and product safety benchmarks signals reliability and professionalism to global partners. Many non-traditional markets, from Latin America to Eastern Europe, are particularly sensitive to quality assurance and traceability. Failure in compliance can lead not only to reputational damage but also to exclusion from lucrative supply chains. By investing in product testing facilities, certification bodies, and buyer-supplier transparency systems, Bangladeshi exporters can demonstrate their readiness to meet global expectations. Such credibility reduces market entry barriers and helps establish long-term contracts with high-value buyers.
Sustainability is no longer a niche requirement it is a mainstream condition for market access. Buyers in the EU, Japan, and North America increasingly demand ESG (Environmental, Social, Governance) compliance across the supply chain. For Bangladesh, this shift presents both a challenge and an opportunity. With the RMG sector already housing some of the worldโs most environmentally certified green factories, the country can expand this reputation across other sectors such as jute, leather, agro-processing, and light engineering. By adopting renewable energy solutions, waste reduction practices, and fair labor standards, exporters can position themselves as leaders in ethical and green manufacturing. This not only secures access to premium markets but also enables exporters to command higher prices and strengthen brand equity globally.
Diversification requires more than producing new goods it demands global recognition. Strategic nation branding campaigns highlighting โMade in Bangladeshโ as a symbol of quality, sustainability, and reliability are essential to shifting perceptions beyond garments. International trade expos, roadshows, and digital marketing campaigns can create visibility for emerging sectors like ICT, pharmaceuticals, and agro-processing. For example, a โBangladesh Business & Innovation Expoโ in Sรฃo Paulo or Johannesburg could position the country directly before untapped buyers in Latin America and Africa. Partnering with global chambers of commerce, trade councils, and diaspora networks further strengthens outreach. Effective branding not only opens new doors but also helps counter lingering stereotypes about Bangladesh as merely a low-cost garment hub, transforming its image into that of a dynamic, diversified, and future-ready economy.
8. SMEs and Entrepreneurship as Drivers of Diversification
Small and Medium Enterprises (SMEs) form the backbone of Bangladeshโs economy, contributing nearly 25% of GDP and employing around 7.8 million people. In the context of export diversification, SMEs are uniquely positioned to drive product innovation and niche market development. Unlike large-scale manufacturers, SMEs can adapt quickly, experiment with new designs, and serve specialized consumer demands in global markets. For example, Bangladeshi SMEs in handicrafts, agro-processing, IT services, and light engineering have already tapped into diaspora communities and boutique buyers abroad. Their agility allows them to capture niche export opportunities in halal food, eco-friendly jute products, or customized software solutions. By supporting SMEs, Bangladesh can broaden its export base and reduce overdependence on large garment conglomerates.
Despite their potential, SMEs often face severe financing bottlenecks that limit their ability to scale for export markets. High collateral requirements, limited access to foreign currency loans, and lengthy bureaucratic processes discourage small exporters from engaging globally. According to ADB estimates, SMEs in Bangladesh face a financing gap of over $2.8 billion annually, with only a fraction of their demand for credit being met. Policy interventions are therefore essential: tailored export credit schemes, interest rate subsidies, credit guarantees, and simplified tax regimes can help SMEs overcome these barriers. Moreover, establishing a dedicated SME Export Fund under institutions like Bangladesh Bank or FBCCI could provide targeted financial support, enabling SMEs to invest in technology, certification, and marketing needed for accessing non-traditional markets.
Women and youth entrepreneurs represent an untapped force in Bangladeshโs export diversification journey. With women constituting only 7% of SME owners but nearly 80% of the RMG workforce, there is immense potential to empower female-led enterprises in agro-processing, crafts, and digital services. Similarly, Bangladeshโs youth half of its population is under 35 are driving growth in ICT, freelancing, and creative industries. Many are already integrated into global value chains via platforms like Upwork and Fiverr, generating $600+ million annually from IT-enabled services. Targeted programs such as entrepreneurship training, incubation centers, and preferential access to export financing can help unleash their potential. By fostering women and youth-led export businesses, Bangladesh not only diversifies its products and services but also creates a more inclusive, resilient, and future-ready economy.
9. Geopolitics and Strategic Partnerships
The prolonged U.S.โChina trade war has created both risks and opportunities for countries like Bangladesh. As tariffs on Chinese goods in the U.S. market remain elevated reaching up to 25% on major industrial and consumer items buyers are actively seeking alternative sourcing destinations. Bangladesh, with its strong manufacturing base, can partially fill this gap, especially in textiles, footwear, and light engineering. At the same time, the European Union is revising its trade policies, including stricter rules on sustainability, labor rights, and carbon emissions (CBAM โ Carbon Border Adjustment Mechanism). These shifts mean that while new opportunities exist, compliance costs are rising. To navigate effectively, Bangladesh must position itself as a credible, compliant, and competitive alternative to China, while also proactively adapting to EUโs regulatory changes to maintain its preferential access post-LDC graduation.
South-South trade commerce between developing nations is emerging as one of the fastest-growing segments of global trade. Already, over 25% of Bangladeshโs exports are directed toward developing countries, and this share is projected to rise further. Partnerships with nations in Asia, Africa, and Latin America offer access to fast-growing consumer markets, often with fewer non-tariff barriers compared to developed economies. Initiatives like the Asia-Pacific Trade Agreement (APTA), as well as bilateral ties with Brazil, South Africa, and Indonesia, provide Bangladesh with platforms to diversify beyond its traditional reliance on Western buyers. South-South cooperation also extends beyond trade in goods technology transfer, joint ventures, and shared infrastructure investments are creating new opportunities. By aligning with these networks, Bangladesh can expand its export footprint and reduce vulnerability to geopolitical tensions among advanced economies.
Emerging economies such as those in Africa, Eastern Europe, and Latin America represent the next frontier for Bangladeshโs export diversification. These regions are characterized by fast GDP growth, rising middle-class populations, and increasing demand for affordable yet quality goods. For example, the African Continental Free Trade Area (AfCFTA) integrates a market of 1.4 billion people with a combined GDP of US $3.4 trillion, while Latin Americaโs Mercosur bloc offers a gateway to a large and dynamic consumer base. Establishing long-term partnerships through trade agreements, joint industrial ventures, and diplomatic missions can secure Bangladeshโs position in these markets. Beyond goods, collaboration in pharmaceuticals, ICT, and logistics can create sustained mutual benefits. Such long-term relationships would help Bangladesh buffer against volatility in traditional markets and embed itself in the growth stories of tomorrowโs economies.
10. Conclusion: ย
In an era defined by trade wars, shifting alliances, and disruptive global events, survival is no longer enough exporters must thrive by embracing a forward-looking strategy. For Bangladesh and similar economies, this requires a blend of policy reforms, business agility, and global outreach. Governments must prioritize digital trade facilitation, investment in logistics, and proactive trade diplomacy, while the private sector should explore new products, markets, and partnerships beyond traditional destinations. A coordinated approach between state institutions, chambers of commerce, and entrepreneurs will be critical in reshaping the countryโs export profile into one that is both diversified and resilient.
At the same time, future-ready exporters must embrace resilience, adaptability, and sustainability as the cornerstones of competitiveness. This means investing in green practices, complying with evolving global standards, and innovating to meet niche demands in untapped markets. Businesses that can pivot quickly, adopt new technologies, and align with global ESG expectations will not only withstand external shocks but also seize emerging opportunities. By embedding resilience into its export ecosystem, Bangladesh can move beyond dependence on a single sector and confidently position itself as a dynamic player in the global economy of tomorrow.