India-US-Bangladesh Textile Trade Dynamics

Feb. 15, 2026

Why in the News?

The U.S.-Bangladesh reciprocal trade agreement, granting zero reciprocal tariffs on select apparel, has triggered concerns for Indian textile exporters.

What’s in Today’s Article?

Background of the U.S.-Bangladesh Textile Deal

The United States has agreed to establish a mechanism under which certain textile and apparel goods from Bangladesh will receive a zero reciprocal tariff rate.
However, this benefit is conditional. The zero reciprocal tariff will apply only to a specified volume of imports and will be linked to the use of U.S.-produced cotton and man-made fibre (MMF) textile inputs.
This development is significant because Bangladesh is one of the largest exporters of garments to the U.S., competing directly with India, China, and Vietnam.

Structure of Bangladesh’s Textile Industry

Bangladesh exported garments worth $50.9 billion globally in 2024, with $7.4 billion going to the U.S.
Its industry model is heavily dependent on imported textile inputs. In 2024, Bangladesh imported textile inputs worth $16.1 billion, of which $3.1 billion came from India.
Bangladesh imports around 85 lakh bales of cotton annually from Brazil, India, and African countries. India alone exported 12-14 lakh bales of cotton and $1.47 billion worth of cotton yarn to Bangladesh in 2024-25.
This indicates that Bangladesh’s garment exports are deeply integrated with Indian raw material supply chains.

India’s Exposure to the U.S. Market

India exports approximately $16 billion worth of garments annually, with nearly one-third going to the U.S.
Both India and Bangladesh primarily produce cotton-based apparel. Therefore, any preferential access granted to Bangladesh directly affects Indian exporters competing in the same market segment.
Currently, Indian goods face an 18% reciprocal tariff in the U.S., while Bangladeshi goods will face 19%, reduced from 20%.
Thus, the tariff differential between India and Bangladesh has narrowed significantly.

India-U.S. Cotton Trade

India imports around five lakh bales of U.S. cotton annually, including 2.5 lakh bales of extra-long staple (ELS) cotton such as American PIMA.
India levies an 11% import duty on cotton, except for ELS cotton. Indian mills are already nominated by American brands to supply yarn made from U.S. cotton.
The Union Commerce Ministry has stated that Indian garment exporters will receive similar access benefits to the U.S. market as Bangladesh.
However, operational clarity on this promise is still awaited.

Possible Shift in Trade Dynamics

Bangladesh may replace Indian cotton with U.S.-produced cotton to qualify for zero reciprocal tariffs.
If this happens, the immediate impact will be on Indian cotton and yarn exporters supplying Bangladesh.
However, analysts note that over 63% of Bangladesh’s garment exports go to the European Union duty-free.
Since its supply chains are oriented toward European buyers, restructuring production to use U.S. cotton may require significant investment in spinning and fabric processing capacity.

Key Concerns for Indian Exporters

Whether India will waive the 11% import duty on U.S. cotton to ensure competitiveness?
How the U.S. will determine the quantity of U.S. cotton content in garments?
Whether increased demand will push up U.S. cotton prices, reducing cost competitiveness?
Whether benefits apply only to reciprocal tariffs or also to basic duties?

Both India and Bangladesh exporters will get relief only from the reciprocal tariff if they use U.S. cotton, not from the basic duty.
If U.S. cotton becomes expensive due to higher demand, garments made from it may not remain competitive compared to those made from cheaper global cotton.

Broader Strategic Implications

India’s textile industry is the largest employment generator after agriculture.
Hence, any shift in global trade patterns has serious economic and employment implications.