The US slashed tariffs on Bangladesh to 19% as the countries announced a trade deal on Monday, a week after a pact was reached with India. The deal placed India among the countries facing one of the lowest tariff rates (18%) from the Trump administration, down from a crippling 50%. It was met with cheers by Indian textile exporters as the deal gave them an advantage over their competitors like Bangladesh, Pakistan (19%), Vietnam (20%) and China (30%). However, the fine print of the US-Bangladesh trade deal seems to have unsettled Indian textile exporters as well as cotton traders. Stay with us, and we will explain how in simple terms.
Apart from lowering tariffs from 20% to 19%, the US has given a breather to Bangladesh’s textile industry, its lifeline, by allowing certain exports to enter America at zero duty. However, this will only apply to those goods produced with American cotton and man-made textiles. This move may undercut India’s position in the US apparel market.
Notably, the US is the top market for India’s textile exports. Thus, when Trump reduced tariffs on Indian exports to 18%, there was considerable joy in the textile industry. Not only did it unlock the US’s $118 billion market for textiles and apparel, but it also strengthened India’s position in global supply chains.
The US already accounts for around $10.5 billion of India’s textile exports. Around 30% of all textile and apparel shipments from the country go to the US. Following the imposition of 50% tariffs, the textiles sector, which contributes 2.3% to India’s GDP, not only registered a dip in exports but also was plagued by a massive inventory pile-up.
In fact, data shows that textile exports to the US fell by over 31% year-on-year in November 2025. Against this backdrop, amid slowing shipments and job losses, the US-India trade deal came as a silver lining for the textile sector.
WHAT US-BANGLADESH TRADE DEAL MEANS FOR INDIA?
However, the US-Bangladesh trade agreement may upend that advantage for India. Even though India’s overall tariff rate is lower than that of Bangladesh, the zero-tariff provision for Bangladeshi garments made using American cotton completely changes the competitive equation.
Essentially, Bangladeshi garments made using US cotton will face zero tax. On the other hand, Indian textiles will be levied an 18% tariff. This possibly means that Bangladeshi apparel is likely to be cheaper than Indian exports to the US.
That’s not all. Another major concern for India is the cotton-related exemption that Bangladesh has secured in its deal with the Trump administration.
However, as ties came under strain following the fall of the pro-India Sheikh Hasina regime in 2024, Bangladesh diversified its exports to countries like Brazil and West Africa.
With the new deal favouring Bangladeshi garments made using US cotton, Dhaka is likely to shift even more towards American cotton. This will put additional pressure on Indian cotton traders.
The impact was already seen on Tuesday, with Indian textile and spinning stocks coming under pressure. Shares of several export-focused textile companies also fell.
Thus, in essence, the US-Bangladesh trade deal is likely to hurt India in two ways. Firstly, cotton exports from India to Bangladesh may fall further. Secondly, the cotton-linked zero tariff provision for Bangladesh may make Indian textile and apparel products less competitive in the US market due to higher costs. With still a month to go before the final trade deal with the US is signed, India may well raise this concern and secure concessions.
