Lower US tariffs on Indian exports have strengthened competitiveness across product segments, but a parallel trade arrangement between Washington and Bangladesh could offset some of those gains.
A Moneycontrol analysis indicates that roughly $1.5 billion worth of India’s cotton trade could face heightened competition if Bangladesh secures preferential access to US markets tied to the use of American cotton inputs.
The proposed arrangement incentivises Bangladeshi exporters to use US cotton raw materials in return for lower or zero tariffs on finished textile exports. This could shift sourcing patterns in one of India’s key export destinations. Bangladesh already plays a central role in India’s cotton trade ecosystem, particularly in intermediate textile inputs.
“The United States commits to establish a mechanism that will allow for certain textile and apparel goods from Bangladesh to receive a zero reciprocal tariff rate… a to-be-specified volume of apparel and textile imports from Bangladesh can enter the United States at this reduced tariff rate, but this volume shall be determined in relation to the quantity of exports of textiles, e.g. US produced cotton and man-made fiber textile inputs, from the United States,” the statement released on February 9 read.
The biggest exposure lies in raw cotton that is neither carded nor combed. More than 70 percent of India’s exports in this category are destined for Bangladesh, while the US exported close to $5 billion worth of similar cotton products globally in 2024. A shift toward American cotton would therefore directly displace Indian shipments. Bangladesh’s reliance on India is less absolute, with less than a quarter of its imports fulfilled by Indian exporters.
Other vulnerable segments include cotton yarn and woven cotton fabrics, where India holds substantial shares in Bangladesh’s imports. For instance, India accounts for nearly 90 percent of Bangladesh’s imports in several dyed and denim cotton fabric categories, highlighting deep supply-chain integration that could be disrupted if tariff incentives favour US inputs.
Bangladesh is already among the largest buyers of American cotton globally—fifth largest in 2024—importing roughly $245 million worth. Any further tilt toward US sourcing could squeeze India’s cotton exports by an estimated $600-650 million, particularly in raw cotton and yarn.
Export threat
The ripple effects may extend beyond intermediate trade. Bangladesh is a major exporter of finished cotton garments to the US, and preferential access tied to US raw materials could strengthen its competitiveness relative to India. Analysis suggests up to 15 percent of India’s $3.6 billion readymade cotton textile exports to the US, or roughly $500 million, could face stronger competition.
Categories such as cotton shirts, bed linen, table linen and furnishing articles are particularly exposed, given Bangladesh’s growing footprint in these segments in the US market. India currently has a strong share in some of these exports, but Bangladesh’s tariff advantage could gradually alter market dynamics.
Away from China
For the US, the arrangement could also help diversify export destinations after a sharp decline in shipments to China following tariff actions in 2025.
China accounted for $1.5 billion of Washington's $6 billion in exports in 2024. The trade had declined 90 percent after Chinese additional tariff of 15 percent on US farm products came into effect in March.
Reorienting supply chains toward South Asia may partly offset those losses.
Overall, while India’s broader trade deal with the US improves market access, the Bangladesh-US cotton linkage introduces a competitive counter current.
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