India’s textile exporters have been jolted by the trade deal announced between the US and Bangladesh on Tuesday, February 10, which sharply alters the competitive balance in the American apparel market and erodes the limited advantage Indian suppliers had begun to regain. The agreement, which lowers US tariffs on Bangladeshi exports and allows zero-duty access for select garments made with US-origin raw materials, has effectively tilted the playing field in favour of Bangladesh in one of the most price-sensitive segments of global trade.
Until now, India had been operating with a narrow but meaningful edge. Recent adjustments in India–US trade terms had brought down tariff barriers on Indian textile and apparel exports, raising expectations that Indian manufacturers could claw back market share from regional competitors, particularly Bangladesh. That optimism has been punctured by the US-Bangladesh deal, which goes beyond a marginal tariff cut and introduces targeted exemptions that directly benefit Bangladesh’s core strength: ready-made garments for the US mass market.
For American retailers and brands, even small differences in landed cost matter, given the thin margins and large volumes involved in apparel sourcing. Bangladesh’s access to zero tariffs for certain categories, when combined with its already lower labour and production costs, translates into a decisive pricing advantage over Indian exporters, who continue to face duties on comparable products. What had earlier been a marginal tariff gap has now become a structural disadvantage for India in the most competitive end of the market.
The impact was immediately visible in Indian equity markets, where shares of textile and garment exporters came under pressure as investors reassessed order prospects from the US. The concern is not just about pricing but also about buyer behaviour. Global apparel buyers typically concentrate sourcing where cost certainty and policy stability are strongest. The new US-Bangladesh arrangement sends a clear signal that Bangladesh enjoys a preferred status, at least for a segment of exports, making it a more attractive long-term sourcing hub.
Bangladesh was already a larger garment supplier to the US than India, despite India’s far broader textile base. The new deal risks widening that gap. Indian exporters are more diversified, spanning yarn, fabrics, home textiles and technical textiles, while Bangladesh remains heavily focused on garments. However, it is precisely garments that dominate US apparel imports by volume, and it is here that tariff concessions have the greatest commercial impact. India’s strengths in upstream and value-added segments do not fully compensate for the loss of competitiveness in basic and mid-range apparel.
The deal also underscores a broader strategic challenge for India. Trade advantages in textiles are increasingly being shaped by bilateral and regional agreements rather than multilateral rules. Bangladesh’s success in securing preferential access highlights the costs of being outside such targeted arrangements. While India has pursued its own trade negotiations, the absence of tariff-free access in key markets leaves exporters vulnerable to sudden shifts when competitors clinch better terms.
In the short term, Indian manufacturers may try to absorb some of the cost disadvantage through efficiency gains or currency movements, but the scope for such adjustments is limited. Over the medium term, the pressure is likely to intensify, particularly for firms heavily dependent on US garment orders. Some may accelerate diversification towards Europe, West Asia or emerging markets, while others may attempt to move up the value chain into design-led or specialised products where price competition is less brutal.
At the policy level, the US-Bangladesh deal is a reminder that incremental tariff reductions are no longer enough to secure durable export advantages. Without comparable preferential access, India risks being boxed out of high-volume segments of the US apparel market, despite its scale, capacity and integrated textile ecosystem. The immediate loss of advantage to Bangladesh may be narrow in percentage terms, but in a sector where margins are slim and competition relentless, it is significant enough to reshape sourcing decisions and export trajectories in the years ahead.