Following the recent conclusion of a trade agreement between India and the European Union, and the prospect of tariff reductions under a US-India bilateral trade deal, fresh concerns have emerged among Bangladeshi exporters. Tariffs on Indian products in the US market are being reduced to 18 percent, while Bangladeshi products continue to face an effective tariff of 20 percent. This has created a clear price gap between two major South Asian exporters. Experts warn that if this disparity persists, Bangladesh’s ready-made garment exports to the US market, despite their historic edge, could be seriously affected.
Bangladeshi exporters are already struggling to compete on price with US buyers. As a result, orders for basic T-shirts, knitwear and casual apparel are increasingly at risk. Sector insiders say export growth declined during the July-December period of 2025, with only marginal improvement in January, while competing countries moved ahead by leveraging global trade advantages. This has created a new crisis for the export sector.
Analysts also caution that if the EU market no longer offers GSP facilities after 2026, Bangladesh could face a major shock in its largest export destination. Against this backdrop, resolving internal challenges, strengthening diplomatic engagement and reinforcing trade strategies have become critically important. Without stronger policy support to ensure exporter stability, the export sector will face further pressure, with direct consequences for the national economy.
The impact is most visible in the ready-made garment sector. Exporters note that even a 1 to 2 percent tariff difference can determine where orders are placed. With lower tariffs, Indian exporters can offer more competitive prices. They also benefit from easier access to raw materials and faster delivery, supported by more efficient ports and supply chains. As a result, Bangladesh’s T-shirt, knitwear and casual apparel orders face serious threat.
Garment sector leaders say tariff differentiation has left Bangladeshi factories with few options. To survive, many may be forced to cut prices to retain buyers. But lower prices will squeeze already thin margins, worsening conditions for factories burdened by high production costs, gas and electricity shortages, and high-interest bank loans.
Between 2021 and 2026, India concluded nine major trade agreements, significantly strengthening its global export position. Bangladesh, by contrast, has only one effective trade agreement with Bhutan, while another with Japan was signed this week.
India’s success is not sudden. It reflects a long-term strategy and a comprehensive textile and apparel ecosystem, with strong backward and forward linkages, infrastructure investment, skills development and higher value addition. Sector stakeholders say that Bangladesh should not remain stuck in despair, but focus on two priorities: identifying where it has fallen behind, and determining how it can stay competitive through long-term planning. This calls for targeted FTA and CEPA strategies, greater value addition, improved logistics and port efficiency, policy stability and investment in skilled human resources. With these steps, the export sector can still be revitalised.
With India’s countervailing tariff set at 18 percent, Bangladesh faces renewed competitive pressure. The current structure is clear: Indian exports face a 15 percent customs duty plus an 18 percent countervailing tariff, while Bangladeshi exports face a 15 percent customs duty plus a 20 percent countervailing tariff. In total, Bangladeshi exporters pay 35 percent in tariffs. This erodes competitiveness as buyers push for lower prices. At the same time, private sector wage pressures are rising amid expectations of public sector salary increases.
In this situation, the government must urgently intensify diplomatic efforts and strengthen policy support to keep the export sector competitive. With a national election approaching, major political parties should also be prepared to debate and negotiate what best serves the country’s economic interests.
The writer is an economic analyst and chairman at Financial Excellence Ltd
