US-Bangladesh deal may hurt India's textile exports

A recent trade agreement between the United States and Bangladesh has raised significant concerns for India's textile industry, potentially undermining the competitive advantage India had recently gained in the US market. The core of the issue lies in a 'zero reciprocal tariff' clause for certain textile and apparel goods exported from Bangladesh to the US, provided these goods are manufactured using US-produced cotton or man-made fibers.. Under the broader US-Bangladesh trade deal, Bangladesh's overall tariff rate on goods exported to the US has been reduced to 19 percent, which is marginally higher than the 18 percent tariff rate applied to Indian textile exports to the US.. However, the zero-tariff provision for specific textile products is what is causing apprehension. This clause effectively creates a significant price advantage for Bangladeshi apparel exports to the US, potentially making them cheaper than comparable Indian products.. India's textile sector had previously rejoiced over the India-US trade framework, which reduced US tariffs on Indian exports from a high of 50 percent to 18 percent.. This move was seen as a crucial step in re-establishing India's price competitiveness in the US market, which is the largest destination for India's textile exports, accounting for approximately $10.5 billion annually.. The new US-Bangladesh agreement appears to negate some of this hard-won advantage. The implications for India are multi-faceted. Firstly, Bangladesh is a major importer of Indian cotton, with a substantial portion of India's cotton exports historically going to Bangladesh.. The incentive for Bangladesh to shift towards US cotton, driven by the zero-tariff benefit on finished garments, could lead to a significant decrease in India's cotton exports to Bangladesh.. This would not only affect Indian cotton traders but also yarn spinners.. Secondly, the increased competitiveness of Bangladeshi apparel in the US market could directly reduce the market share of Indian textile and apparel products.. The concerns have been amplified by political reactions in India. The opposition Congress party has criticized the government, labeling the deal as 'bad news for India' and a 'double blow' to the Indian economy, arguing it harms domestic cotton farmers and yarn spinners.. Rajya Sabha MP Priyanka Chaturvedi highlighted the tariff disparity, questioning the benefit for Indian exporters facing an 18% tariff compared to Bangladesh's 0% for certain goods.. However, some analysts and industry stakeholders suggest that the actual impact might be limited.. The higher cost of US cotton compared to Indian cotton, coupled with the logistics and time involved in realigning supply chains, could offset the tariff advantage for Bangladesh.. Additionally, the specifics of the zero-tariff clause, including the volume of eligible exports and the exact categories of products, remain unclear, leaving room for India to potentially negotiate its own concessions or maintain a competitive edge.. The US-Bangladesh trade deal was signed on February 9, 2026.. Bangladesh's interim government views this deal as a 'game changer' that could significantly boost its textile sector, which forms the backbone of its economy, accounting for over 80% of its total exports.. In return for these trade benefits, Bangladesh has committed to providing preferential market access to US industrial and agricultural goods, along with accepting US safety and emissions standards.. The news of the US-Bangladesh deal led to a noticeable dip in the stock prices of several Indian textile companies, including Gokaldas Exports, KPR Mill, Arvind, and Pearl Global Industries, reflecting investor concerns about the potential impact on their businesses.. The Finance Minister of India, Nirmala Sitharaman, had previously stated that Budget proposals were not influenced by US tariff actions and were part of ongoing domestic reforms..

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