US-Bangladesh deal: In a trade order that shifts by the week, no pact makes a country immune from competition. Days after New Delhi concluded its arrangement with Washington and exporters began to count modest gains, the United States announced a trade pact with Bangladesh. The numbers are close. In textiles, that is the point.
The US-Bangladesh trade pact was announced days after Washington concluded its arrangements with New Delhi and has altered the competitive geometry of apparel exports. Dhaka has secured a tariff reduction from an earlier proposed 37% to about 19%. It will also enjoy zero-duty access for specified volumes of garments made using US cotton and man-made fibre inputs.
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Two details will decide how much this matters: the size and product coverage of the “specified volumes”, and the rules-of-origin architecture that verifies the use of US inputs. In garments, a headline tariff is only half the instrument. The other half is compliance design and enforcement—certificates, audits, and what happens when shipments do not qualify.
India’s apparel margin squeeze in the US market
The immediate impact lies in the narrowing—and in certain segments, the possible reversal—of India’s tariff advantage in the US market. Indian exporters expected reciprocal tariff adjustments to leave them marginally better placed than competitors such as Bangladesh, Vietnam, and Cambodia. That expectation has shifted. The tariff differential in India’s favour has shrunk from roughly two percentage points to about one percentage point.
This is not a trivial change for a sector where operating margins hover in the low single digits, and where large US retailers and sourcing offices arbitrage small price differences across suppliers. The United States remains the single-largest export destination for both India and Bangladesh in the textile and apparel segment.
The exposure is not uniform. India is most vulnerable where competition is most standardised—basic cotton and MMF categories, large-volume knitwear and mass-market lines—where buyer switching costs are low.
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For Bangladesh, garment exports account for more than 80% of export earnings. For India, garments are roughly 3–4% of total exports. That does not make the loss painless. Even a small swing in sourcing in a large market can add up to billions of dollars in orders over time.
US-input condition hits India’s cotton and yarn chain
The pact’s zero-duty window is tied to US cotton and man-made fibre inputs. That condition matters for India beyond finished garments. If Bangladesh shifts procurement towards US cotton/MMF to qualify, India’s cotton, yarn, and fibre suppliers face a second channel of impact: upstream demand loss, even if final-garment competition tightens only marginally.
Beyond garments and textiles, the agreement is not an unqualified setback for India. Trade outcomes must be assessed across the negotiating basket, and Bangladesh appears to have made broad concessions in exchange for a narrow textile advantage.
Dhaka has reportedly opened sectors such as chemicals, medical devices, machinery, ICT equipment, agricultural products, and energy imports to preferential US access, while committing to higher imports of US cotton, wheat, soybean products, and liquefied natural gas. It has also agreed to purchases such as an order for around 25 aircraft from a US manufacturer, estimated at roughly $3–3.5 billion.
These commitments could have two opposing effects on Bangladesh’s competitiveness. They may raise input costs and import dependence over time. Or they may buy Bangladesh stability in market access at a moment when preferences are changing. The balance will depend on the fine print and on how quickly these obligations bite.
US-Bangladesh deal and impact on pharma, medtech and automotive sector
Analysts expect limited impact on India’s pharmaceutical and medical device exports. Bangladesh has very few medtech exports to the US—possibly under $50 million per year—mainly personal protective equipment, some hospital furniture, syringes, and needles. In contrast, India’s medtech exports to the US were $787.57 million in FY25, a 9.55% rise from $714.30 million in FY24.
Pharma executives also argue that since pharmaceuticals are exempt from reciprocal tariffs, Bangladesh does not gain a tariff-led edge in this segment. At $10.52 billion, the US market is the largest export destination for Indian pharma companies, accounting for 34.6% of India’s $30.38 billion pharmaceutical exports in FY25. Bangladesh’s pharmaceutical exports to the US are approximately $20–25 million annually. India’s advantage lies in scale, low-cost generics, and established FDA-approved supply chains.
Industry experts expect limited implications for India in automobiles and components. Bangladesh’s automotive ecosystem is small and largely centred on import, refurbishment, and re-export of used vehicles and parts, rather than original equipment manufacturing comparable to India’s integrated supply chain. India’s auto industry has a large manufacturing base, a diversified component ecosystem, and long experience in meeting multiple regulatory standards. That makes meaningful trade diversion in this segment unlikely.
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India’s competitiveness now depends on supply chains and RoO
The broader takeaway is the transformation in trade diplomacy. For India, tariff negotiations alone no longer determine competitiveness. Value-chain integration, rules-of-origin design, and supply-chain diplomacy increasingly do.
India-Bangladesh economic ties have seen friction in recent months, including policy changes affecting transshipment arrangements and broader strategic signalling by Dhaka toward multiple partners. Separate trade agreements with the United States now add a signalling layer: both countries are trying to secure bilateral advantage inside a shifting regional economic order.
As Bangladesh prepares to graduate from Least Developed Country status, preference erosion becomes a commercial problem, not a diplomatic talking point. Dhaka’s pursuit of targeted tariff and quota concessions with major economies is likely to intensify. For India, the implication is narrower and harder: labour-intensive sectors will face more frequent, fine-print competition—category by category, rule by rule.
India’s recent trade engagements with advanced economies already aim in this direction. The Bangladesh pact is a reminder that competitive advantage in global manufacturing is perishable and needs constant reinforcement.