In a rapidly evolving trade landscape, Indian textile exporters are seeing their anticipated competitive advantage over Bangladesh fluctuate following back-to-back trade announcements from Washington in February 2026.
As of February 12, 2026, the “tariff war” between the two South Asian neighbors has shifted from headline rates to the specific “fine print” of their respective deals with the United States.
The Initial Edge: India’s 18% Breakthrough
On February 7, 2026, Commerce Minister Piyush Goyal announced a landmark interim trade deal with the U.S. that slashed reciprocal tariffs on Indian goods from 50% down to 18%.
- Zero-Duty Access: While most apparel faces an 18% rate, India secured 0% duty for specific high-value categories, including silk products, handloom, and handicrafts.
- The Advantage: At 18%, India initially appeared to have a clear pricing lead over its primary rivals: Bangladesh (20%), Vietnam (20%), and China (30%+).
- Market Impact: The Tiruppur Exporters’ Association projected that garment shipments to the U.S. could double to ₹30,000 crore within three years due to this new “preferred” status.
The Counter-Move: Bangladesh’s “Zero-Tariff” Clause
The landscape shifted on February 10, 2026, when the U.S. and Bangladesh signed their own deal. While Bangladesh’s headline reciprocal tariff was set at 19% (1% higher than India’s), it included a strategic “backdoor” for zero duties.
The “US-Cotton” Quota
Bangladesh secured a mechanism allowing a specific volume of garments to enter the U.S. at 0% duty, provided they are manufactured using U.S.-origin cotton or man-made fibers.
The “Double Blow” for India:
- Upstream Loss: Bangladesh is the largest buyer of Indian cotton. To qualify for the 0% U.S. duty, Dhaka is likely to shift its multi-billion dollar cotton procurement from India to the U.S.
- Downstream Loss: Indian apparel facing an 18% tariff may now struggle to compete with Bangladeshi garments that qualify for the 0% “US-Cotton” quota.
India vs. Bangladesh: Comparison (Feb 2026)
| Feature | India-US Deal | Bangladesh-US Deal |
| Headline Tariff | 18% (Reciprocal) | 19% (Reciprocal) |
| Zero-Duty Access | Silk, Handloom, Pharma, Gems | Apparel made with US-inputs |
| Key Condition | Shift from Russian Oil to US Energy | $3.5B Agri-purchase + Boeing order |
| Market Focus | Mid-to-High Value; Generic Pharma | Mass-market, high-volume apparel |
Why Some Experts Say “Don’t Panic”
Despite the stock market volatility (where Indian textile stocks fell 3–5% following the Bangladesh news), analysts from the Global Trade Research Initiative (GTRI) suggest the impact might be limited:
- Supply Chain Rigidity: Bangladesh’s factories are currently optimized for the European market (which uses non-U.S. yarn and fabric). Rebuilding spinning and processing capacity to handle U.S. cotton for the American market requires massive, time-consuming investment.
- Quota Limits: The 0% duty for Bangladesh is restricted to a “to-be-specified volume,” whereas India’s 18% rate applies across the board, providing more scalability for large orders.
- India’s Fabric Edge: Unlike Bangladesh, India has an integrated supply chain. If Indian mills import U.S. cotton, spin it into yarn, and then supply it to Bangladesh, the final garment might still qualify for the duty waiver—potentially turning a rival’s deal into a “backdoor” opportunity for Indian spinners.
