Indian textile and spinning stocks came under sharp selling pressure on Tuesday after the United States and Bangladesh concluded a reciprocal trade agreement. The agreement, announced late Monday, lowers the overall US tariff on Bangladeshi exports to 19% and introduces a mechanism that allows certain Bangladeshi textile and apparel exports to enter the US at zero reciprocal tariffs, subject to conditions.
This move may undercut India’s position in the US apparel market. Shares of several export-focused textile companies fell as investors reassessed the impact of the US-Bangladesh tariff arrangement and a key provision linked to US cotton usage.
This development comes just days after optimism had lifted Indian textile stocks on hopes around an India–US trade framework.
Textile stocks retreat after recent rally
Following the news, textile counters that had rallied in recent sessions saw profit-taking. Gokaldas Exports dropped around 3%, Nitin Spinners fell 2.5%, KPR Mill slid nearly 5%, and Vardhaman Textiles declined about 3% during Tuesday’s trade. Some stocks saw deeper intraday cuts, with Gokaldas Exports slipping over 5% at one point.
The market reaction reflects concerns that Bangladesh could gain a fresh cost advantage in the US, a key destination for global apparel exports.
What the US–Bangladesh deal offers
Under the agreement, the US has committed to setting up a mechanism that allows a specified volume of apparel and textile imports from Bangladesh to enter the American market at a zero reciprocal tariff rate. The catch is that this benefit will be linked to the use of US-produced cotton and man-made fibre inputs.
In addition, the total tariff rate on Bangladeshi exports has been reduced sharply to 19% from about 37% earlier, reinforcing Bangladesh’s role as one of the US’s most important textile sourcing hubs.
India–US framework offers relief, but not a free run
Earlier this month, India and the US announced a framework for an interim trade agreement, under which US tariffs on Indian textile and apparel exports are expected to be cut to 18% from levels that had crossed 50% earlier in the year.
While India’s tariff rate may be marginally lower than Bangladesh’s headline rate, the zero-tariff window for Bangladeshi garments made using US cotton changes the competitive equation. The concern is what this might imply for buyers. The market is assessing the probability of whether Bangladesh-made apparel could turn out cheaper than Indian exports, despite India’s improved tariff access.
Cotton clause adds another layer of pressure
The cotton-linked exemption in the US–Bangladesh deal is particularly significant for India. Bangladesh is one of the world’s largest cotton importers and is also the biggest buyer of Indian cotton, accounting for over 70% of India’s cotton exports.
In recent years, Bangladesh has already diversified its cotton sourcing, increasing imports from Brazil and West Africa while reducing dependence on India. The new deal is expected to accelerate a shift toward US cotton, further squeezing Indian cotton exporters.
Impact on Indian textile and spinning companies
The fallout is likely to be felt on two fronts. First, India’s cotton exports to Bangladesh could decline further, forcing Indian suppliers to look for alternative markets. Second, Indian apparel and textile exporters could lose price competitiveness in the US, where India’s market share remains modest at around 5–6%, compared with higher shares held by Bangladesh and Vietnam.
Companies with large yarn and spinning capacities are seen as more vulnerable to this shift. Firms such as Vardhaman Textiles, Nitin Spinners, KPR Mills, Nahar Spinning Mills and Ambika Cotton Mills may need to diversify export markets and reassess their exposure to the US-led supply chain.
Conclusion
While the India–US trade framework has lowered tariff barriers and offers long-term promise, the fine print of the US–Bangladesh agreement has clearly unsettled investors. For now, the market is signalling caution. Indian textile companies may still benefit from improved access to the US, but the rise of Bangladesh as a zero-tariff competitor, backed by US cotton, has added a fresh headwind to an already competitive global industry.