However, an Indian government source said Dhaka has made significant concessions by opening sectors that were previously protected, in return for slight gains in the textiles sector.
Bangladesh is the world’s second-biggest garment manufacturer and is the main competitor of India in the US textile and apparel market, along with China and Vietnam. Under the agreement, US President Donald Trump’s administration is set to trim US ‘reciprocal’ tariffs on Bangladesh products from 20 per cent to 19 per cent, which means the tariff differential between India and Bangladesh has halved from 2 per cent to 1 per cent.
The US also committed to establish a mechanism that will allow for certain textile and apparel goods from Bangladesh to receive a zero reciprocal tariff rate. “This mechanism will provide that a to-be-specified volume of apparel and textile imports from Bangladesh can enter the US 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 fibre textile inputs, from the United States,” said a joint statement on Tuesday.
“While CITI (Confederation of Indian Textile Industry) is awaiting clarity on the mechanism to be put in place by the US that will allow for certain textile and apparel goods from Bangladesh to receive a zero reciprocal tariff rate, it acknowledges that this opens a fresh challenge for India’s textiles and apparel exporters, for whom the US is their single-largest market,” said Ashwin Chandran, CITI chairman.
“This challenge is two-fold. First, the tariff differential between India and Bangladesh has halved from 2 per cent to 1 per cent, which is a matter of concern in a sector with narrow profit margins. Secondly, the US-Bangladesh Agreement on Reciprocal Trade could likely adversely affect India’s cotton yarn exports to Bangladesh,” he added. Bangladesh is already among the leading exporters of textiles and apparel to the US, alongside China, Vietnam, and India. Any additional advantage for Bangladesh could further increase competition for Indian exporters.
A government official said the agreement has to be assessed in its entirety, rather than by individual provisions or sectors. On the other hand, India has been able to protect areas where Bangladesh has given greater market access.
According to the joint statement on the US-Bangladesh agreement, Bangladesh has committed to provide significant preferential market access for US industrial and agricultural goods, including chemicals, medical devices, machinery, and motor vehicles and parts, information and communication technology (ICT) equipment, energy products, soy products, dairy products, beef, poultry, and tree nuts and fruit.
However, the local spinning and fabric ecosystem in Bangladesh is still giving India an edge. Bangladesh exports about $44 billion of garments, of which 80 per cent ($35 billion) are cotton garments, implying $17-18 billion of yarn and fabric demand. However, its domestic spinning and fabric capacity can support only $3-4 billion, leaving a structural gap.
Even for the US market alone (₹70,000 crore), this constraint holds. Bangladesh’s spinning, pre-treatment, and generation (SPG) sector cannot fully pivot to US cotton due to entrenched exposure to Europe and the UK. “At best, only 20-25 per cent of yarn and fabric demand can be met internally; the balance must be outsourced to India and Vietnam, if rules permit. In such a scenario, Indian yarn and fabric exports benefit,” said Prabhu Dhamodharan, convenor, Indian Texpreneurs Federation (ITF).
During the January to November period of 2025, textile imports from India and Bangladesh were set at $9.06 billion and $7.77 billion, respectively. Imports from India to the US dipped by 5 per cent, 30.1 per cent, and 31.4 per cent in September, October, and November, respectively. However, January to November imports from India increased by 2.3 per cent.
“Now, the reciprocal tariff becomes zero for Bangladesh if made from US cotton, while India is high at 18 per cent. This zero tariff will be for a limited volume that will be determined by the US at a later date,” said Sanjay Kumar Jain, managing director of Delhi-based TT Ltd and chairman of the ICC National Textiles Committee.
“Recent signals suggest the US is allowing flexibility to sustain cotton exports. This opens an opportunity for India. As one of the world’s largest spinners with an integrated textile ecosystem, India should push for zero-duty concessions on garments made using US cotton, converting this gap into a competitive edge for Indian apparel exports,” said Dhamodharan.
 "Under the trade agreement, the Donald Trump administration is set to trim US ‘reciprocal' tariffs on Bangladesh products from 20 per cent to 19 per cent")