US-Bangladesh trade agreement unlikely to dent India's auto exports

The US-Bangladesh reciprocal trade pact is unlikely to materially affect India's auto and auto component exports, analysts say, despite tariff concessions and wider market access for Dhaka

The United States and Bangladesh have finalised a bilateral reciprocal trade agreement aimed at deepening economic ties, but analysts say the deal is unlikely to materially impact India’s automotive and auto component exports, despite concessions granted to Dhaka on tariffs and market access.

 

Under the revised framework, Bangladeshi exports to the US will attract a 19 per cent tariff, marginally lower than the 20 per cent imposed in August and sharply below the earlier reciprocal rate of 37 per cent.

 

In return, Bangladesh will grant wide preferential access to US industrial and agricultural products, covering chemicals, medical devices, machinery, automobiles and components, information and communication technology (ICT) equipment, energy supplies and farm products. Dhaka has also agreed to address non-tariff barriers by recognising vehicles built to US federal safety and emission standards, accepting US Food and Drug Administration certificates for pharmaceuticals and medical devices, and easing restrictions on remanufactured goods.

 

While the agreement signals deeper US–Bangladesh trade integration, industry experts say its implications for India, particularly in the automotive sector, are limited.

 

“The Indian automotive industry is far larger, deeper and structurally more competitive than Bangladesh’s,” said Anurag Singh, managing director at Primus Partners. “Bangladesh’s engagement with automobiles is largely centred around the import, refurbishment and re-export of second-hand vehicles and parts. That is a small and niche segment, and not comparable with India’s scale.”

 

Singh added that the cost advantage Bangladesh has traditionally enjoyed in labour-intensive segments is narrowing, reducing the likelihood of meaningful trade diversion away from India.

 

“The labour cost gap between India and Bangladesh is shrinking. Moreover, Indian exporters are already accustomed to producing differently specified vehicles and components to meet the homologation and regulatory requirements of importing countries. Adapting to changing rules is business as usual for Indian OEMs,” he said.