More than 200 apparel exporters have been pushed into subcontracting due to Trump’s tariffs and the non-cooperation of commercial banks, industry insiders said.
Two other factors – weak marketing strategies and the financial incapabilities of the factories – have also contributed to the shift towards subcontracting.
They said after the US declared reciprocal tariffs, American apparel buyers hesitated to place new orders in the middle of the season, with many seeking price cuts. This left smaller factories, which failed to retain their Western buyers, becoming subcontractors to larger ones, as more aggressive exporters secured the orders.
“Since April, over 200 factories have shifted to subcontracting roles and are no longer directly exporting to their former buyers,” said Masud Kabir, standing committee chair on press, publication and publicity of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Kabir, however, refrained from disclosing the names of the affected factories, citing commercial sensitivity.
Industry experts told TIMES of Bangladesh that this situation will not affect the industry, as other companies are still receiving orders from brands and subcontracting them to smaller factories. That is why export growth remains stable or increases to some extent.
Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said not only US tariffs but also the lack of cooperation from banks and weak marketing strategies are responsible for the decline of many factories, forcing them into subcontracting.
He further said many factories had lost buyers, especially in the US, due to the immediate suspension of purchase orders following the imposition of the tariff. “However, many of them are recovering. But without support from banks, it will not be possible for many factories to recover at all.”
As an example, Hatem mentioned that Orbit Fashion in Dhamrai had been conducting export operations for a long time using third-party mortgages. But recently, the bank withdrew its support for the third-party mortgage. As a result, the factory can no longer export directly. It will either have to operate as a subcontractor or shut down entirely.
Although there were no directives from the central bank, commercial banks discouraged third-party mortgages out of fear that they would not be able to recover the assets.
Regarding this situation, Vice President of Standard Bank Md Hadiuzzaman told TIMES that commercial banks provide third-party mortgages only to companies in good standing.
According to Hatem, subcontractors contribute around 10 to 12 percent of the country’s total apparel exports. Subcontracting allows overburdened exporters to outsource manufacturing work while sharing some of the profit margin.
However, subcontractors do not benefit from state incentives, operate with razor-thin margins, and face lower confidence from lenders and buyers, he added.
The situation has emerged as Bangladesh’s garment sector, the second largest in the world, grapples with rising costs, shrinking profit margins, and shifting global trade dynamics.
Akhter Hossain Apurbo, owner of Wisdom Apparels Ltd, shared his recent struggles with TIMES. While he was not seeking other buyers, his regular buyer turned to a larger factory that agreed to cut prices in June.
“Due to the shortage of orders, one of my factories remained closed until 7 September. With some new orders, I resumed operations. However, I may only be able to run the factory until the end of September,” he said.
“After that, if no new orders come, I’ll either have to shut it down again or turn to subcontracting to keep it operational,” he continued.
Similarly, ENM Fashion, a Narayanganj-based apparel manufacturer, previously exported 60 percent of its production to the US market. However, since the reciprocal tariffs were announced, the company has started receiving fewer orders and thus became subcontractors to sustain operations.
Former BGMEA president Anwar-ul Alam Chowdhury said overall apparel exports will not be affected, despite many factories being forced to shift to subcontracting, as these factories are still executing orders on behalf of others.
Despite the frustrating situation for companies becoming subcontractors, an opposite scenario has been seen in the RMG industry, as most factories are now overwhelmed with sufficient orders.
“I have received at least 15 percent extra orders for next spring and summer seasons,” Sparrow Group Managing Director Shovon Islam told TIMES. His company exported clothes worth $300 million last year.
