Under the US–Bangladesh pact, American tariffs on Bangladeshi exports have been reduced to 19% from 20%, significantly lower than the 37% rate imposed in April 2025. More crucially, the agreement offers zero-duty access for certain apparel products, provided they are manufactured using US-origin cotton and man-made fibres.
The announcement has sparked anxiety among Indian exporters, who fear the zero-duty clause could neutralise India’s relative tariff advantage under the India–US deal, where the average textile tariff is expected to come down to around 18%.
However, former diplomats and industry leaders speaking to CNBC-TV18 caution that the perceived threat may be overstated.
Tariff optics vs ground reality
At first glance, the numbers appear uncomfortably close—18% for India, 19% for Bangladesh, with Bangladesh enjoying zero-duty access in select categories. But according to Jayant Dasgupta, former Indian Ambassador to the WTO, the structure of the Bangladesh deal itself limits its impact.
“From a reading of the text, this appears to be a tariff rate quota, not an unlimited zero-duty window,” Dasgupta said. “It’s not that Bangladesh can import any amount of US cotton, convert it into garments, and export everything duty-free to the US.”
Even if Bangladesh were to fully utilise the quota, execution challenges remain significant.
Structural constraints cap Bangladesh’s upside
Industry veterans point to capacity bottlenecks that could prevent Bangladeshi exporters from fully leveraging the zero-duty provision.
“Bangladesh has issues in spinning capacity, high power costs, and unreliable power supply,” Dasgupta noted. “Its woven fabric industry is also far less modernised than its knitted segment.”
RK Vij, National President of the Textile Association of India, echoed this assessment, arguing that India’s upstream strength remains unmatched.
“India supplies about $3.5 billion worth of textiles to Bangladesh, of which nearly $1.8 billion is cotton and yarn,” Vij said. “Bangladesh’s cost of spinning is higher than India’s, and logistics work in India’s favour.”
He added that sourcing cotton from the US would increase transit time and transportation costs, undermining any tariff benefit. “From India, raw material reaches Bangladesh in five or six days by truck. US cotton cannot compete with that efficiency.”
US strategy: Export raw material, import finished goods
The Bangladesh deal also fits into a broader, well-established US trade strategy.
“This is not new,” Dasgupta said. “The US has followed similar ‘yarn-forward’ and ‘fabric-forward’ rules in its CAFTA agreements. The idea is to push American raw materials out and bring value-added products back.”
Seen through this lens, the Bangladesh pact is less about undercutting India and more about advancing US domestic interests.
Political timing, limited economic fallout
The agreement also comes at a sensitive political moment for Bangladesh, days ahead of elections following the ouster of Prime Minister Sheikh Hasina. Muhammad Yunus, the chief adviser to Bangladesh’s interim government, said Washington had committed to establishing a mechanism under the deal.
But even here, experts see limited long-term fallout for Indian exporters.
“Yes, there could be some short-term stress,” Vij acknowledged. “But Bangladesh ultimately has to buy from India. Vietnam, Myanmar and others are also competing for US market share.”
Negotiation window still open for India
Crucially, India’s interim trade deal with the US is not yet final.
The White House is expected to issue an executive order this week lowering the average tariff rate to 18%, followed by a detailed legal text—covering zero-duty concessions and non-tariff barriers—by mid-March.
“This is exactly why India should push for more concessions now,” Dasgupta said. “Nothing is final. The US wants access to Indian industrial and agricultural markets, and those will not come free.”
Former Indian Ambassador to the US Meera Shankar agreed that India has legitimate grounds to seek parity.
“The Bangladesh deal was clearly a reaction to the India–US agreement,” she said. “It undercuts India to some extent, and that makes it legitimate for India to ask for similar concessions—especially in man-made fibres and select high-end cotton.”
What India may push for next
Industry leaders say any additional concessions should be tied to critical raw materials.
“For man-made fibres, PTA and energy are key inputs,” Vij said. “If the US wants zero duty on certain exports to India, then PTA and energy should also be zero duty. That would directly strengthen India’s textile value chain.”
Shankar added that selective zero-duty imports could be examined if they are linked to guaranteed market access for Indian exports.
Also Read: Explained | Why US trade deal with Bangladesh has sunk Indian textile stocks?
Bottom line
While the US–Bangladesh textile pact has rattled sentiment, experts say India’s competitive position remains structurally stronger—and the final outcome will depend on negotiations still underway.
For now, the Bangladesh deal may be more headline risk than material threat—but with the clock ticking toward mid-March, India’s next moves will be critical.
Watch accompanying video for entire discussion.
