The US tariff concession to Bangladesh looks, at first glance, like a clever geopolitical move. Zero duty on apparel made using US cotton is meant to do three things at once: prop up Bangladesh’s export economy, create captive demand for American farmers, and quietly check India’s growing dominance in global textiles. On paper, it reads like chess. In reality, it may be a miscalculation at the level of basic arithmetic.
Because textiles are not decided by tariffs alone. They are decided by input costs, energy reliability, execution risk and scale. And this is where the math begins to unravel the strategy.
Start with cotton — the fulcrum of the deal. Bangladesh produces virtually no cotton of its own. Over 98 percent of its requirement is imported. Today, its cheapest and most efficient sources are India, Brazil and parts of Africa. US cotton, over a full cycle, tends to trade at a premium to Indian cotton — though recent market dislocations briefly inverted this relationship. Add longer shipping routes, insurance and currency exposure, and the delivered cost gap can easily move into low-double digits.
Now place that into a simple cost structure. Cotton typically accounts for 35–45 percent of the raw material cost of basic apparel. If Bangladesh switches from Indian or Brazilian cotton to US cotton to qualify for zero tariff access, its cotton component alone becomes 9–12 percent more expensive. Translated into the finished garment, that is roughly a 3.5–5 percent increase in total production cost — before accounting for power, labour or compliance.
Against this, Bangladesh saves a US tariff of roughly 18–19 percent. On the surface, that looks decisive. But tariffs apply only at the border. Cotton costs compound throughout the production cycle. When freight, financing, wastage and energy disruptions are factored in, the net advantage compresses rapidly. What remains, in most realistic scenarios, is not an 18 percent edge — but a single-digit advantage of perhaps 4–5 percent, and that only if everything goes right.
And things rarely go right in Bangladesh.
The country’s garment sector already operates on razor-thin margins. Power shortages are no longer episodic — they are structural. Factories rely on diesel generators that add volatile, unhedgeable costs just when global buyers are demanding price stability and faster turnaround times. Political uncertainty raises insurance premiums, delays shipments and quietly shifts risk back onto suppliers through harsher buyer contracts. None of this shows up in tariff spreadsheets in Washington. All of it shows up in sourcing decisions in New York.
A complication, often cited in favour of the Bangladesh-US deal, is that US cotton has recently been cheaper than Indian cotton — even after freight. That is factually correct, but analytically incomplete. Through late 2025 and early 2026, US cotton futures hovered near 63–64 cents per pound, while India’s Shankar-6 traded closer to 74–78 cents, lifted by minimum support prices, weather disruptions and tighter domestic supply. Even after adding 2–3 cents per pound for freight and insurance, US cotton landed cheaper for Indian mills, triggering a tactical surge in imports.
But this is a price inversion, not a structural shift. Cotton markets are cyclical. Indian prices were temporarily distorted upward; US prices were depressed by surplus stocks. Crucially, the implications differ sharply by country. India imports US cotton because it can — as a margin optimisation during abnormal cycles — and pivots back to domestic supply the moment parity returns. Bangladesh imports US cotton because it must, tying its tariff access to a foreign raw material and foreign shipping routes. What is flexibility for India becomes dependency for Bangladesh.
Textiles are not made on spreadsheets. They are made in factories. And once you move from quoted prices to operational reality, cotton economics stop being decisive on their own. Domestic cotton gives Indian mills three structural advantages that imported cotton cannot replicate: no ocean freight volatility, no 45–60 day working-capital lock-ups, and no foreign-exchange or hedging exposure. Even in periods when US cotton lands cheaper on a pure price basis, these frictions matter — especially for short-staple and medium-count yarns that dominate mass apparel. This is why India’s cotton imports rise tactically during price dislocations but never replace domestic supply strategically. The system remains anchored at home.
Now contrast this with Bangladesh.
India does not need to rearrange its supply chain to play this game. It has domestic cotton — abundant, proximate and increasingly premium-segmented. Even when Indian cotton trades slightly higher in quality grades, exporters save on freight, time and working capital. There is no forced input substitution, no geopolitical conditionality embedded in the raw material. The cotton is already there.
Yes, Indian apparel still faces an ~18 percent US tariff. But India’s input base starts cheaper. When you net domestic cotton savings against the tariff gap, the effective difference with Bangladesh shrinks dramatically — often to near parity, and in some categories, flips in India’s favour. Especially once reliability is priced in.
This is where the US strategy starts to look less like chess and more like checkers.
Propping up Bangladesh
Washington is attempting to keep Bangladesh economically buoyant as a counter-weight to India — but without addressing the country’s core constraints: energy, stability and scale. A tariff waiver cannot compensate for a factory that shuts down twice a week due to power cuts. Nor can it offset the risk premium global brands quietly attach to politically fragile sourcing hubs. Buyers may flirt with zero-tariff math, but they commit capital where supply chains are durable.
India, meanwhile, is becoming exactly that: durable.
Its textile industry is moving up the value curve — from basic cut-and-sew to integrated cotton-to-garment ecosystems. Domestic cotton is no longer just cheap; it is traceable, scalable and increasingly aligned with sustainability mandates. That matters more to US and European buyers than a few percentage points shaved off at customs.
This is why the idea that the textile industry will permanently migrate away from India does not hold up under scrutiny. If anything, the reverse is slowly unfolding. As compliance costs rise, energy insecurity deepens and input costs climb in Bangladesh, India’s combination of scale, cotton self-reliance and operational resilience becomes decisive.
The Second Layer
India’s growing web of trade agreements adds a second, often under-appreciated layer of advantage to its textile story. While the US remains a key market, India is no longer hostage to a single destination, unlike Bangladesh, which sends nearly 80 percent of its garment exports to just the US and EU. The proposed India–EU trade agreement, along with existing and upcoming pacts with the UAE, Australia, Japan, South Korea and the UK, steadily neutralises India’s historical tariff disadvantage in high-value markets.
As these agreements phase in, Indian textiles gain preferential or zero-duty access across multiple consumption centres at once — spreading risk and improving pricing power. For global buyers, this creates a powerful incentive: sourcing from India allows them to service multiple geographies from one integrated supply base, without rewriting their cost structures country by country. Bangladesh cannot replicate this advantage; it remains narrowly exposed to US and EU policy swings. In effect, India’s trade diplomacy is turning textiles from a vulnerable export sector into a strategic global supplier, where tariff resilience and market diversification matter as much as labour cost — and increasingly, more.
End Game
The uncomfortable truth for Washington is this: propping up Bangladesh through tariff engineering cannot manufacture competitiveness where fundamentals are weak. And attempting to contain India by subsidising its neighbour ignores the sheer gravitational pull of India’s industrial base.
Tariffs can bend trade flows temporarily. They cannot override economics indefinitely.
The result is almost pre-written. Bangladesh may gain marginal orders at the low end — until the next power shock or political tremor. India, meanwhile, absorbs capacity, moves up the value chain, and consolidates its position as the only textile ecosystem large enough, stable enough and cotton-secure enough to serve the world at scale.
If this is a chessboard, India isn’t reacting to the gambit. It’s playing a longer game — one built not on concessions, but on control of the most basic input of all. Cotton. |
