‘Global’ impact in bilateral deals

A bilateral deal with an immense global twist. It involves competition from Bangladesh, and an economic counter to Pakistan, apart from the concerns of the local cotton growers. The impact of the India-US trade deal encompasses issues related to industry, agriculture, and bilateral and global trade. This is most evident in the case of textile exports from, and cotton imports into, India. Couple this with rising, or lower competition in the export arena from two of India’s neighbours. There is excitement, panic, worries, and confusion. Each side speaks different languages, including the trade deal negotiators. 

Earlier this month, panic gripped India’s textile and apparel exporters who had begun to celebrate the interim trade agreement between India and the US, and the possible adverse impact on Pakistan exporters. The US deal indicated a tariff of a mere 18 per cent, instead of the earlier combined 50 per cent. Yet, the dread among the exporters was triggered by the US-Bangladesh agreement, which was announced a few days later. In it, Washington decided to slash import duty on cloth exported by Dhaka, if it was made exclusively from American cotton. Hence, zero tariff on product exports in lieu of raw

material imports.

In jargon terms, “Bangladesh to receive a zero reciprocal tariff rate,” on “a to-be-specified volume of apparel and textile imports from Bangladesh,” but only on “US-produced cotton and man-made fibre textile inputs, from the United States.” In simpler terms, if a Bangladesh textile exporter imports either American cotton, or its petrochemical intermediates like fibre, it can export at zero tariff. There will be a cap on annual volume exported under this mechanism. Suddenly, the Indian exporters felt that Bangladesh exports, at least till the to-be-specified quota, would be cheaper.

The tensions were palpable in India, considering that textile and apparel exports to the US amount to $11 billion, or nearly 29 per cent of India’s global exports. During the trade negotiations between India and the US, between April 2025 and January 2026, India’s textile exports registered a degrowth of 2.35 per cent, according to the data by the Confederation of Indian Textile Industry. The data showed that textile exports in January 2026 declined by 3.68 per cent, and apparel exports were down by 3.84 per cent on a year-on-year basis.

Commerce Minister Piyush Goyal had to step in personally to assuage the emotions. He announced that the final India-US trade deal, which may be fully unveiled in March 2026, would have a similar clause like the Bangladesh one. So, exports from both the neighbours will be evenly matched, and Indian exports will be on a level-playing field. Ironically, once this was made public, the Indian industry revealed that the zero-tariff clause did not really matter. The earlier controversy about it seemed like ‘much ado about nothing,’ A lot of heat and dust.

According to RK Vij, President, Textile Association (India), zero duty based on input import and finished product export, may not always benefit the industry in the long run. He points out that American cotton is more expensive than Indian cotton, if one adds the logistics costs of imports, the landed price will offset the saved duty. India, indeed, has an edge over the other Asian cotton-growing textile competitors in the trade deal with the US. The lower tariff of 18 per cent on Indian goods is less than Bangladesh, which faces a duty of 19 per cent, or even a low-cost producer like Vietnam, with a tariff of 20 per cent.

In effect, garments usually face a 12 per cent duty as the most favoured nation tariff, which will bring the duty on Bangladesh to 31 per cent, and 30 per cent for India. The Tamil Nadu-based Southern India Mills’ Association echoed the same sentiments and thoughts. It stated that 18 per cent is the lowest tariff negotiated by any competing country with the US. India’s trade deals with other global economies and groups, like the UK and European Union (EU), will give a huge boost to Indian textile and apparel exporters, adds Animesh Saxena, general

secretary, Garments Exporters and

Manufacturers Association.

“The US deal will happen in a few weeks. The one with the EU will be operational in a few months. We see business growing by at least 30-40 per cent in another two years,” explains Saxena. In fact, he takes a dig at the opposition from the Indian cotton growers, who fear the adverse impact on prices and demand due to American cotton imports. Saxena feels that production is short of industry requirements. Farmer unions, as expected, think differently. They contend that the

industry has repeatedly exaggerated the claims of shortages.

“Farmers fear that importing cheap, highly-subsidised American cotton will crash domestic prices. Prices have fallen below the minimum support price in several regions, and dropped by `1,000-1,500 per quintal after the recent duty exemptions,” claims a statement from the Samyukt Kisan Morcha (SKM), a farmers’ platform. In the crop year (October 1 to September 30) 2024-25, India imported 41.4 lakh cotton bales worth nearly `12,000 crore, of which more than 8.5 lakh bales were from the US, according to Textile Minister Giriraj Singh. These imports show the fallacies in claims that imports are expensive.

Yet, the ministry admits that a “combination of factors” affected production and yield. This is due to a “reduction in the area under cotton cultivation, adverse climatic conditions such as uneven rainfall and extreme temperatures in predominantly rainfed regions, negative impact of monocropping, a shift by farmers to remunerative crops, and the resurgence of pests and higher incidences of diseases,” according to an answer to Lok Sabha question in December 2025. While India is the world’s largest producer, the cotton output has moved from over 300 lakh bales in 2015-16 to less than 307 lakh bales

in 2024-25.

“India was an exporter. In 2022-23, it opened imports with three lakh bales from Australia. After the US imposed a 50 per cent tariff, India allowed higher imports (to help industry). Now (with a trade deal), Goyal is saying that we will import cotton and export textile,” alleges Rajan Kshirsagar, president, CPI-affiliated All India Kisan Sabha. (Between August and December 2025, duty on cotton imports to India was exempted as a “strategic move in response to escalating international and domestic pressures on India’s textile and garment sector,”) Like it or not, while the grower-to-manufacturer three-way tug-of-war between farmers, textile exporters, and the policy-makers, is not a zeros-sum game, the benefits to each will differ widely.

(The Author has more than three decades of experience across print, TV, and digital media); views are personal