The United States has reduced import tariffs on goods from Bangladesh to 19% after the two countries announced a trade agreement on Monday, just a week after Washington finalised a similar pact with India. Under the India deal, tariffs were sharply cut from a steep 50% to 18%, placing India among the countries facing the lowest duties imposed by the Trump administration. The announcement was initially welcomed by Indian textile exporters, who believed the lower tariff would give them a competitive edge over rivals such as Bangladesh and Pakistan (both at 19%), Vietnam (20%), and China (30%).
However, a closer look at the US–Bangladesh agreement has caused unease among Indian textile exporters and cotton traders. While Bangladesh’s headline tariff rate was marginally reduced from 20% to 19%, the deal includes a significant concession for its textile sector, which forms the backbone of the country’s economy. Under the agreement, certain Bangladeshi textile and apparel products will be allowed to enter the US market at zero duty, provided they are manufactured using American cotton and man-made fibres. This provision could weaken India’s competitive position in the US apparel market.
The US is the single largest destination for India’s textile exports. As a result, when tariffs on Indian goods were lowered to 18%, the domestic textile industry celebrated the move. The reduction was seen as opening access to the US’s massive $118 billion textile and apparel market and strengthening India’s role in global supply chains.
Currently, the US accounts for nearly $10.5 billion of India’s textile exports, with around 30% of India’s total textile and apparel shipments heading to the American market. After the earlier imposition of 50% tariffs, the sector—which contributes about 2.3% to India’s GDP—saw a sharp slowdown. Exports declined, inventories piled up, and the industry faced mounting stress.
Data indicates that textile exports from India to the US fell by more than 31% year-on-year in November 2025. Against this backdrop of declining shipments and job losses, the US–India trade deal was viewed as a much-needed boost for the struggling sector.
However, the US–Bangladesh agreement now threatens to dilute that advantage. Although India technically enjoys a lower overall tariff rate than Bangladesh, the zero-duty access granted to Bangladeshi garments made with American cotton significantly alters the competitive landscape.
In practical terms, Bangladeshi apparel produced using US cotton will face no import tax in the US, while Indian textile exports will continue to attract an 18% duty. This differential could make Bangladeshi garments cheaper and more attractive to American buyers than Indian products.
Another major area of concern for India is the cotton-related exemption included in Bangladesh’s deal with the US. Textiles make up more than 80% of Bangladesh’s total exports, and the country relies heavily on imported cotton. Bangladesh is the world’s largest cotton importer and has traditionally been the biggest buyer of Indian cotton. Until a few years ago, nearly 70% of India’s cotton exports were shipped to Bangladesh.
However, following political changes in Bangladesh after the fall of the pro-India Sheikh Hasina government in 2024, trade relations cooled, and Dhaka began diversifying its cotton imports to suppliers in Brazil and West Africa. With the new trade deal incentivising the use of American cotton, Bangladesh is expected to further reduce its dependence on Indian cotton, increasing pressure on Indian cotton exporters and traders.
Market reactions reflected these concerns, with Indian textile and spinning stocks coming under pressure on Tuesday. Shares of several export-oriented textile companies also declined.
The opposition Congress seized on the issue to criticise the Narendra Modi government, arguing that the zero-tariff provision for Bangladeshi textile exports deals a double blow to India by harming both cotton farmers and yarn spinners. The party said the agreement weakens India’s textile sector and threatens millions of livelihoods.
Rajya Sabha MP Priyanka Chaturvedi also criticised the deal, questioning how Indian exporters would benefit from an 18% tariff when Bangladeshi products enjoy zero-duty access.
In effect, the US–Bangladesh trade deal could negatively impact India on two fronts. First, India’s cotton exports to Bangladesh may decline further. Second, the zero-tariff advantage for Bangladeshi garments made with US cotton could make Indian textiles and apparel less competitive in the American market due to higher costs. With about a month still remaining before the final US trade agreement is signed, India may raise these concerns and seek additional concessions.
