The United States and Bangladesh have concluded a newtrade agreementthat lowers tariffs on Bangladeshi goods to 19% — marginally above the 18% rate imposed on India. But the real cause for concern in New Delhi is not the lowering of tariffs, but the zero-duty provision embedded in the statement. Certain textile and apparel goods from Bangladesh using US-produced cotton and man-made fibre will receive zero reciprocal tariff in the US market, as part of the new deal. For India’s textile industry, which had been looking forward to gaining following theIndia-US interim trade deal,this clause could blunt the competitive edge it was hoping to leverage.

Bangladesh has secured a reduced 19 per cent tariff under a trade agreement with the US that would exempt some textiles and garments manufactured with US materials, interim government chief Muhammad Yunus announced earlier this week. Yunus, known for his pro-US stance, said the deal was reached after nine months of negotiations since April last year.

Bangladesh Commerce Secretary Mahbubur Rahman said the recently concluded US-India trade deal might have influenced Washington's decision to cut the tariff “possibly due to geopolitical considerations”. He said the agreement was signed in Washington by Commerce Adviser Sheikh Bashir Uddin and US Trade Representative (USTR) Jamieson Greer.

This is the second time that the US has reduced tariffs on Bangladesh. The South Asian nation in August last year had secured a reduction in US tariffs on its exports to 20 per cent, down from 37 per cent initially proposed by Washington.

According to Bangladesh Commerce Secretary Mahbubur Rahman, Bangladesh’s key export-earning ready-made garments (RMG) made from cotton and synthetic fibres imported from the US would enjoy 'zero reciprocal duty' under the deal. Business analysts believe that the deal offered much-needed relief to Bangladesh’s apparel exporters as the RMG sector accounts for more than 80 per cent of its export earnings and employs some 4 million workers, mostly women, and contributes about 10 per cent to gross domestic product (GDP), according to PTI.

Bangladesh's closest competitor, Vietnam, received a 20 per cent reciprocal tariff, while Pakistan, Cambodia and Indonesia have also been subjected to a 19 per cent tariff.

However, the Zero-Tariff Clause has caused worries in the Indian textile exporters, who were rejoicing a tariff rate lower than that of Bangladesh as part of the India-US trade deal till last week. For the unversed, the US is one of the top markets for India's textile exports. When the Trump administration reduced tariffs on India, there was considerable joy in the textile industry as it placed India in an advantageous position compared to others.

At the industry level, exporters in Tiruppur, the country’s largest knitwear cluster, were optimistic about increasing exports to the US. Tiruppur Exporters’ Association president K M Subramanian said exports of garments to the US could potentially double to Rs 30,000 crore within three years, alongside the creation of nearly five lakh new jobs, as reported by PTI. Starrlight Exporters founder M Rathinasamy, told the news agency that orders earlier routed to Bangladesh and other competing countries were expected to shift back to Tamil Nadu following the India-US agreement.

With Bangladesh exporters now enjoying zero duty, the competitive equation in the American market may become more layered for Indian exporters. However, the arrangement being tied to the use of American raw materials, the Bangladeshi manufacturers may face higher input costs or supply constraints, potentially limiting the scale of advantage, according to an ET report.

For India, the impact will likely depend on how aggressively Bangladeshi firms leverage this clause and whether Indian exporters can compete on scale, product diversification, and value addition rather than tariff arithmetic alone.

Source: India Latest News, Breaking News Today, Top News Headlines | Times Now