Under the agreement, textiles manufactured in Bangladesh using U.S.-produced cotton and man-made fibre will attract zero reciprocal tariffs in the U.S. market. The development is being viewed as negative for Indian manufacturers, as it could intensify competitive pressures.
However, domestic brokerage JM Financial sought to calm investor nerves, noting that Bangladesh has always been, and was expected to remain, competitive in textile exports, and that these tariff tweaks do not materially alter the broader competitive landscape.
Further, the list of ‘certain items’ eligible for exemptions is not yet in the public domain. “India too enjoys the benefit of significantly lower tariffs if the total usage of U.S. cotton in the product is at least 20% of the mix. For example, in a $10 product, if India uses U.S. cotton worth $2, then tariffs are payable only on $8, and this exemption increases with higher use of U.S. cotton,” analysts explained.
Also read: Risk-on trade back? Smallcap stocks rally up to 28% in 2026, but market breadth stays weak
The real talking point, experts note, is a proposed mechanism under which select Bangladeshi textile and apparel exports could qualify for zero duty if they are linked to the use of U.S. textile inputs such as cotton and man-made fibre (MMF). However, the benefit is expected to be product-specific, subject to volume caps, and remains pending detailed implementation rules. India already follows a somewhat comparable framework, where greater use of U.S. cotton lowers the dutiable value of exports, effectively reducing the overall tariff burden.
The White House said Bangladesh will also ease non-tariff barriers by accepting U.S. vehicle safety and emissions standards, recognising U.S. Food and Drug Administration certifications, and removing import restrictions on remanufactured goods.The overall U.S. tariff rate on Bangladeshi exports has meanwhile been reduced to 19%, slightly higher than India’s 18% rate. “The agreement will provide U.S. and Bangladeshi exporters unprecedented access to each other’s respective markets. The agreement will build upon our longstanding economic relationship,” the two countries said in a joint statement.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
