What the US-Bangladesh trade deal actually says Live Events Why Indian textiles were upbeat Will Bangladesh’s zero-tariff change the equation? India’s Europe edge A balanced outlook despite near-term volatility as a Reliable and Trusted News Source Addas a Reliable and Trusted News Source Add Now! (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel Shares of several Indian textile companies came under sharp pressure in trade on February 10 after the United States and Bangladesh announced the conclusion of their reciprocal trade agreement. Stocks that had surged earlier on optimism surrounding the India-US trade framework reversed course, with counters such as Gokaldas Exports, KPR Mill, Arvind and Pearl Global Industries falling up to more than 5 per cent during the session. The market reaction reflected concerns that preferential access promised to Bangladesh textiles under the US deal could dilute the competitive advantage Indian exporters were expected to gain in the American market.
Bangladesh and the US have signed a bilateral trade agreement aimed at strengthening economic ties, concluding nine months of negotiations. Under the deal, the US will lower reciprocal tariffs on Bangladeshi goods to 19 per cent, down from the levels initially specified in Executive Order 14257 issued on April 2, 2025. This rate is marginally higher than the 18 per cent reciprocal tariff agreed upon for Indian textile products under the India-US trade framework.
However, the most sensitive element of the US-Bangladesh agreement for Indian exporters lies in a specific commitment related to textiles and apparel. According to the joint US-Bangladesh statement, Washington has agreed to establish a mechanism that would allow a certain volume of Bangladeshi textile and apparel exports to enter the US at a zero reciprocal tariff rate.
The size of this quota will be determined in relation to Bangladesh’s imports of US-origin textile inputs, such as American cotton and man-made fibres. This clause has triggered fears that Bangladesh could regain a pricing edge in the US apparel market despite the higher headline tariff. Before the US-Bangladesh announcement, there was widespread belief that Indian textile exports were poised to gain a meaningful advantage in the American market.
The India-US trade framework was seen as a landmark development that would open access to the United States’ $118 billion global import market for textiles and apparels. The Indian government said that with the US already being India’s largest export destination for textiles, accounting for about $10. 5 billion in exports, the agreement would be transformative.
Around 70 per cent of these exports are apparel, while made-ups contribute roughly 15 per cent. According to the textile ministry, the 18 per cent reciprocal tariff on Indian products would eliminate the long-standing disadvantage faced by domestic exporters and place India in a stronger position relative to key competitors such as Bangladesh (which was at 20 per cent), China at 30 per cent, Pakistan at 19 per cent and Vietnam at 20 per cent. The ministry said this shift in relative tariffs would prompt large global buyers to reassess sourcing strategies in India’s favour.
The government further noted that the deal could play a pivotal role in helping India achieve its ambitious target of $100 billion in textile exports by 2030, with the US expected to contribute more than one-fifth of that goal. On the ground, exporters in Tiruppur, India’s largest knitwear hub, initially expressed strong optimism following the India-US announcement. According to PTI, Tiruppur Exporters’ Association president K M Subramanian said garment shipments to the US could double to Rs 30,000 crore over the next three years.
He also projected the creation of around five lakh additional jobs during this period. Subramanian, who is also the founder-chairman of K M Knitwear Pvt Ltd, noted that the industry currently employs about 10 lakh people and could see employment rise to 15 lakh over the next three to five years.
Another Tiruppur-based exporter, Starrlight Exporters founder M Rathinasamy, told PTI that orders which previously went to Bangladesh and other countries were expected to shift back to Tamil Nadu after the India-US deal. Rathinasamy, an executive committee member of the Tiruppur Exporters’ Association, said the agreement was likely to bring a surge in US orders for Indian manufacturers.
The proposed zero-tariff access for certain Bangladeshi textile and apparel products has tempered this optimism. Market participants fear that even a partial exemption could blunt India’s newly gained tariff advantage in the US market.
However, crucial details of the Bangladesh exemption remain unclear. The agreement does not specify which textile or apparel categories will qualify for zero tariffs, the exact volume of imports that will be eligible, or the timeline for implementation.
The mechanism is also linked to Bangladesh’s use of US-origin textile inputs, which could limit its applicability or raise costs for Bangladeshi exporters. Given these uncertainties, it is entirely possible that the zero-tariff window does not materially disrupt India’s competitive position.
Moreover, since India and the US are still negotiating the final contours of their trade deal following last week’s framework announcement, there remains scope for India to retain a clear edge over Bangladesh – or at least remain equally competitive – in the US textile market. Even as questions linger over the US market, India has already secured a major breakthrough in Europe.
The EU-India trade deal announced on January 27 grants India immediate zero-duty access to the European Union’s USD 263 billion textile market. The government has said that tariffs on textile imports will be eliminated outright under the agreement.
CareEdge Ratings described the EU deal as “critical” for improving India’s global competitiveness. The ratings agency estimates that India could increase its share of the EU textile market to 9 per cent from the current 5 per cent, translating into an additional USD 4.
5 billion in annual exports over the medium term. The EU-India agreement also significantly alters the competitive landscape for Bangladesh. For years, Dhaka has benefited from preferential access to the European market as a Least Developed Country.
With India now enjoying zero-duty access as well, that tariff cushion is effectively eroded. The EU is Bangladesh’s largest trading partner, with textiles and apparel accounting for nearly all of that trade.
While this does not mean Bangladesh will automatically lose market share, it can no longer rely on legacy preferences to protect its position. Instead, it will have to compete directly with India on a level playing field, one where India has a more integrated and diversified textile industry and is receiving strong policy support, including several incentives announced in the Union Budget on February 1. In sum, while the US commitment to explore zero-tariff access for some Bangladeshi textile exports has unsettled Indian markets, the actual threat to India’s export prospects remains uncertain.
The absence of clarity on product coverage and volumes, ongoing India-US negotiations, and India’s strengthened position in the EU together might suggest that the longer-term outlook for Indian textiles remains intact. Rather than undermining India’s momentum, the Bangladesh exemption may ultimately prove to be a limited concession with narrow applicability. For now, the sharp stock market reaction appears to reflect anxiety over unknowns rather than a definitive reversal of India’s improving global trade position.