Bangladesh’s zero-duty US access poses fresh challenge to Indian textile exporters

Bangladesh trade agreement to hurt India

• US grants zero-duty on Bangladeshi textiles made from US cotton
• India faces reduced tariff advantage and potential impact on cotton yarn exports
• Tiruppur exporters seek same concessions for Indian garments using US cotton.

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Days after India’s labour-intensive textile exporters breathed a sigh of relief following the United States’ decision to lower reciprocal duties, Bangladesh’s zero-tariff access for select garments is posing fresh challenges for this margin-sensitive sector.

The US–Bangladesh Agreement on Reciprocal Trade, signed on February 9, lowers the reciprocal tariff on Bangladeshi goods from 20 percent to 19 percent. It also includes a mechanism for granting zero-duty access to textile and apparel products from Dhaka made with US‑produced cotton.

“This challenge is two-fold. First, the tariff differential between India and Bangladesh has halved from 2 percent to 1 percent, which is a matter of concern in a sector with narrow profit margins. Second, the US–Bangladesh Agreement on Reciprocal Trade could likely adversely affect India’s cotton yarn exports to Bangladesh,” Confederation of Indian Textile Industry (CITI) chairperson Ashwin Chandran said.

Advantage Bangladesh?

Vinay Agarwal, a Surat-based yarn trader and leader of the Nylon Spinners Association, said Indian export can still remain competitive. India has a tariff differential of 1–2 percent with key competitors such as Bangladesh and Vietnam and an even higher advantage versus China.

“The zero-duty concession for US‑produced cotton will tilt Bangladeshi sourcing towards the US, which could impact imports from India,” Agarwal said.

India’s exports of cotton yarn, fabrics, made-ups and handloom products to Bangladesh stood at $2.39 billion in 2024‑25, making it the top shipment to the country in value terms.

The operational details of the zero‑duty mechanism are still being finalised by US authorities.

For Indian textiles and apparels, while the US will lower reciprocal tariffs from a punishing 50 percent to 18 percent, as of now, there is no provision for zero-duty access in this segment.

Tiruppur, the largest knitwear and cotton textile hub in India, is calling for similar concessions to support Indian exports.

Tiruppur Exporters’ Association president Kumar Doraiswamy said allowing a tariff exemption for garments made with US cotton will support export growth without harming domestic farmers.

“We urge the government to take up this matter with US authorities at the earliest under Executive Order 14257,” Doraiswamy said.

He explained that global buyers are becoming increasingly strict about fibre quality, compelling exporters to import high-quality cotton to fulfil confirmed orders.

“In today’s globalised trade environment, restricting cotton or yarn exports is not feasible, making such imports unavoidable to sustain export growth,” Doraiswamy added.

The issue is sharpened by the role of long-staple US cotton, which is critical for meeting stringent quality requirements in export markets.

India has already offered duty concessions under tariff-rate quotas for imports of extra-long staple cotton from the United States through the proposed interim agreement.

However, unlike Bangladesh, India has so far not secured zero-duty access for finished garments made using this cotton, a gap that exporters say gives Bangladesh a cost advantage and puts Indian manufacturers at a competitive disadvantage.

From April to November of 2025, Bangladesh’s ready‑made garment exports to the US reached about $7.6 billion, more than double of India’s $3.26 billion during the period.

“Bangladesh is already among the leading exporters of textiles and apparel to the United States, alongside China, Vietnam, and India. Any additional advantage for Bangladesh could further increase competition for Indian exporters,” Chandran said.