As the US-China tariff war intensifies, German companies are increasingly eyeing Bangladesh as a potential alternative manufacturing hub, drawn by the country’s large workforce and competitive edge. With bilateral trade reaching €8.6 billion in 2023, Bangladesh is poised to capitalize on the global shift.
A high-level German delegation recently visited Bangladesh to explore closer trade ties amid global tariff tensions. The delegation, which included representatives from the German Foreign and Economic ministries, participated in the Bangladesh Investment Summit 2025 and held talks with the interim government.
German investors face regulatory complexities due to strict laws and regulations.
The country's dual-track system, which requires companies to list on both the Frankfurt Stock Exchange and a regional exchange, adds complexity.
Additionally, Germany's corporate governance rules are among the most stringent in Europe, making it challenging for foreign investors to navigate.
Key Players in German-Bangladesh Trade
Germany and Bangladesh share close economic relations, with bilateral trade amounting to €8.6 billion ($9.8 billion) in 2023. “The country is a significant export market for Bangladesh”. Germany is the second-biggest export market for Bangladesh, with textiles accounting for more than 90% of Bangladeshi exports to the EU nation. The country imports machinery as well as chemical products and electrical goods from Germany.
Germany is one of the largest trading partners of Bangladesh, with bilateral trade exceeding $1 billion annually.
The majority of German exports to Bangladesh include machinery, electronics, and vehicles.
In contrast, Bangladesh primarily exports textiles, clothing, and leather goods to Germany.
To further enhance trade ties, both countries have established a joint committee to facilitate cooperation in areas like investment, technology, and infrastructure development.
Several German companies are present in Bangladesh, operating manufacturing facilities, particularly in the garments and leather goods sectors. Early entrants like “Ospig GmbH employ thousands of workers to produce high-quality jeans and jackets”, while Picard has been manufacturing handbags and accessories since 1995. Some German firms also operate joint ventures, such as Hana System Ltd., a collaboration between Germany’s Cube, a major bicycle manufacturer, and Bangladesh’s Meghna Group.
Several German companies have established operations in Bangladesh, driven by the country's growing economy and favorable business environment.
Siemens, a leading technology company, has been present in Bangladesh since 1999, providing 'infrastructure solutions for power generation and transmission.'
Bosch, another prominent German firm, has also set up shop in Dhaka, offering 'automotive components' and engineering services.
The presence of these companies has created employment opportunities and contributed to the country's economic growth.
Geopolitical Shifts and Tariff Tensions
The US-China tariff war has prompted German firms to explore alternative manufacturing hubs. With the need to diversify and recent tariff disruptions, Bangladesh has the potential to be an alternative location for consumer goods, household appliances, electronics, and industrial components. The country’s workforce of 114 million and middle-income bracket equivalent to Malaysia’s population offer numerous business opportunities.
Economist “Masrur Reaz, CEO of Policy Exchange Bangladesh think tank”, described the current situation as a pivotal moment. He urged the Bangladeshi government to act swiftly to address outdated regulations, trade logistics weaknesses, and productivity improvements through skills and technology.
Challenges for German Investors
Despite the challenges, Bangladesh’s competitiveness has significantly improved. However, many investors remain cautious due to the ongoing political transition. The interim leader “Muhammad Yunus is trying to enact democratic reforms” and hold a fresh election, which he has promised to stage by June next year at the latest. Unlike investors from across Asia or other European countries, German companies are currently hesitant to seize opportunities in this political transition period.
Conclusion
The US-China tariff war has created an opportunity for Bangladesh to attract foreign investment leaving China. With its workforce and middle-income bracket, the country offers numerous business opportunities. However, the ongoing political transition poses a challenge for German investors. It is essential for the Bangladeshi government to address these challenges to capitalize on this window of opportunity.
