US Textile Tariff Reset: India's Structural Edge Over Bangladesh's Conditional Deal
As the United States recalibrates its tariff framework with major Asian textile suppliers, India and Bangladesh are navigating sharply divergent pathways with contrasting implications for their export futures. While Bangladesh appears to have clinched a significant concession on paper, India's industrial structure may ultimately deliver more substantial and durable benefits in the competitive global apparel market.
The Bangladesh Offer: Conditional Zero-Duty Access
Under the US-Bangladesh joint statement of February 9, Washington agreed to reduce reciprocal tariffs on Bangladeshi goods to 19% while offering zero reciprocal duty specifically for garments manufactured using US-origin cotton and man-made fibers. This means Bangladeshi garments that typically face a 12% most-favored-nation (MFN) tariff would otherwise incur a total duty of 31%, but can revert to just 12% if they incorporate American fibers.
On the surface, this represents a meaningful concession that could enhance Bangladesh's competitiveness in the US market. However, the practical utility of this arrangement is severely constrained by structural realities within Bangladesh's garment sector.
Structural Limitations of Bangladesh's Industry
Bangladesh's apparel industry is not built around fiber-based production, with less than one-third of garments manufactured starting from raw fibers. The sector relies heavily on imported yarns and fabrics rather than domestic raw cotton processing. In 2024 alone, Bangladesh imported $16.1 billion worth of textile inputs, with China supplying $9 billion and India $3.1 billion, while US supplies amounted to just $274 million, primarily raw cotton.
To qualify for zero-duty access, manufacturers would need to dramatically increase their use of US fibers while simultaneously investing in spinning and fabric capacity that the industry currently lacks. This restructuring faces limited incentive, particularly since over 63% of Bangladesh's garment exports already enjoy duty-free access to the European Union, reducing the urgency to redesign supply chains primarily for the US market.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), emphasized the structural challenges: "Bangladesh's apparel industry is deeply integrated with Asian supply chains, particularly for yarns and fabrics. For an industry structurally dependent on Asian inputs, the zero-duty carrot is difficult to utilize at scale, creating a lopsided trade-off."
India's Position: Flexibility Through Integration
India does not currently receive zero-duty access for garments under its US trade framework, with apparel exports expected to face combined duties of approximately 30% (12% MFN plus 18% reciprocal). However, India's access is not tied to fiber-origin conditions, allowing exporters to continue utilizing existing domestic and regional supply chains without restructuring sourcing to meet US-specific requirements.
India's textile industry boasts comprehensive vertical integration spanning cotton cultivation, yarn production, fabric manufacturing, and garment assembly. This integrated structure provides exceptional flexibility to scale orders once tariff uncertainty diminishes, even if headline duty rates remain relatively elevated compared to Bangladesh's conditional offer.
Market Dynamics and Long-Term Implications
Bangladesh's heavy dependence on the EU market, which absorbs over $32 billion of its $50.9 billion annual garment exports with unconditional duty-free access, reduces the compelling need to redesign supply chains for conditional US benefits. The US accounts for a smaller share of Bangladesh's exports, making substantial restructuring less economically justifiable.
Conversely, India has been strategically expanding its presence in the US market as global buyers diversify away from Chinese suppliers. With tariff rates now clarified, exporters report improved visibility that could support fresh bookings and longer-term supply contracts, particularly in labor-intensive segments including apparel, home textiles, and made-ups.
India maintains its position as a major supplier of yarn and fabrics to Bangladeshi garment factories. If Bangladesh struggles to meet US sourcing conditions, its dependence on Indian textile inputs is unlikely to diminish, positioning India not only as a competing garment exporter but also as an indispensable upstream supplier within regional textile value chains.
Abhas Kumar, a trade expert, noted the strategic advantage: "The zero-duty window is narrow and conditional. India's arrangement may not appear generous initially, but it permits exporters to operate without altering supply chains, which proves far more valuable for sustained growth."
While immediate gains may not be dramatic, India's structural advantages—vertical integration, supply chain flexibility, and regional supplier positioning—create a foundation for more durable export growth. The ultimate outcome will depend on cost competitiveness, execution efficiency, and how effectively Indian exporters respond to evolving global apparel supply chain dynamics.
