The recent 90-day suspension of U.S foreign aid, initiated by President Donald Trump’s executive order on January 20 this year has sparked significant disruptions in various countries, particularly Bangladesh. The United States Agency for International Development (USAID) has instructed its partners in Bangladesh to immediately halt all activities, impacting key sectors such as health, education, and infrastructure.
While Bhutan is not a direct recipient of USAID funding, the aid suspension could indirectly affect the country through its trade relations with Bangladesh. Experts warn that regional economic instability resulting from the aid freeze could lead to shifts in trade patterns, increased logistical costs, and potential migration pressures.
Trade Implications for Bhutan
USAID funding plays a crucial role in Bangladesh’s infrastructure, health, and agriculture sectors. Analysts believe that a sudden cessation of aid could hinder economic growth, reducing Bangladesh’s import capacity and weakening its overall trade strength. If the Bangladeshi economy slows down, demand for Bhutanese exports—including boulders, electricity, minerals, and agricultural products—could decline.
An official from the Department of Trade emphasized that while Bhutan is not directly affected by the USAID suspension, economic repercussions in Bangladesh could lead to slower trade, higher costs, and logistical disruptions. “Bhutan may need to explore alternative trade strategies if the situation deteriorates further,” the official stated.
Connectivity and Trade Route Concerns
As Bhutan’s primary gateway to global trade, Bangladesh plays a crucial role in facilitating exports. Disruptions in Bangladesh’s infrastructure projects due to the aid freeze could slow down logistics, increasing costs for Bhutanese goods en route to India and other markets. Experts highlight that a slowdown at Chattogram Port—Bhutan’s key transit point—could delay shipments and inflate transport costs.
Currency and Inflation Pressures
Financial analysts warn that if the aid suspension triggers economic instability, the Bangladeshi Taka (BDT) could depreciate; making Bhutanese exports to Bangladesh more expensive and reducing demand. Inflation in Bangladesh could further exacerbate the situation, making it more challenging for businesses to sustain import levels from Bhutan.
“The epicenter might be Bangladesh, but the tremors will be felt by Bhutan,” said a financial expert in the country.
Trade Policy and Bilateral Relations
Should Bangladesh experience economic distress, it may introduce new trade barriers, tariffs, or import restrictions, complicating Bhutan’s export processes. Bhutan, which relies on Bangladesh for essential goods, could also face price surges on imported products.
A trader in Phuentsholing suggested that Bhutan may seek alternative trade routes via India or neighboring countries if trading through Bangladesh becomes less viable, potentially strengthening India’s role in regional commerce.
Bhutan-Bangladesh Trade: A Strong Economic Partnership
The two countries signed a transit agreement in 1980, facilitating trade expansion. Bhutan’s exports to Bangladesh have surged in recent years, particularly in boulders, which constitute the largest export commodity. Other major exports include cardamom, oranges, limestone, dolomite, fruit juices, and construction materials.
According to official data, Bhutan exported Nu 3,258.04 million worth of goods to Bangladesh in 2015, Nu 3,955 million in 2022, and Nu 5.03 billion in 2024.
Bhutan and Bangladesh have signed multiple trade agreements over the years, fostering economic cooperation. The 2017 Memorandum of Understanding (MoU) on inland waterways granted Bhutan access to Bangladesh’s sea routes for cargo transportation.
In 2022, a Preferential Trade Agreement (PTA) was implemented, offering duty-free access to 100 Bangladeshi goods in Bhutan and 50 Bhutanese goods in Bangladesh. Duty-free Bangladeshi exports to Bhutan include ready-made garments, juices, condensed milk, biscuits, cosmetics, toiletries, dried fish, cement, tea, plywood, and light engineering products.
Meanwhile, Bhutan enjoys duty-free benefits on exports such as boulders, vegetables, fruits, minerals, construction materials, chemicals, gypsum, dolomite, processed foods, spices, and furniture.
Bangladesh ranks third among Bhutan’s top ten trading partners, accounting for 4% of Bhutan’s total foreign trade. As economic uncertainties loom, experts suggest close monitoring of trade dynamics to mitigate potential disruptions and sustain the growing economic partnership between the two nations.
“While the full impact of the USAID halt remains uncertain, Bhutan and Bangladesh must navigate these economic shifts strategically to maintain stability and trade continuity,” said an official from the Foreign Affairs Ministry.
Tashi Namgyal from Thimphu