With the help of India and a number of other Central Asian nations, Bangladesh’s economy is based mostly on the textile sector.
Bangladesh produces textiles, but the cotton used to make them comes from India. But Bangladesh has made a significant announcement. Muhammad Yunus’s temporary administration and the US inked a bilateral trade pact on February 9.
The Yunus government concluded a trade agreement with the United States just three days prior to today’s, Thursday, elections in Bangladesh. The Yunus government kept the deal extremely secret and did not release its text with anyone, raising doubts about its legitimacy.
As part of an agreement with the United States, Bangladesh is progressively cutting back on its purchases of cotton from India. Bangladesh has declared that it will no longer buy cotton from India but rather from the United States.
In an interview, Bangladesh’s Chief Advisor Muhammad Yunus’s communications advisor Shafiqul Alam called the trade deal with the US a “game changer.” According to him, it will improve Bangladesh’s access to the US market, which is vital for the country.
Through a trade agreement, the United States has lowered its tariffs with Bangladesh by one percentage point, bringing them down to 19%. The same 19% tax has also applied to Bangladesh’s textile sector rivals, such as Cambodia and Indonesia.
Additionally, America has stated that there will be no tariff on Bangladeshi clothing made from American cotton or synthetic fibers, allowing Bangladesh to sell its products in the United States without incurring any fees.
Despite having a sizable textile sector, Bangladesh is unable to generate enough yarn or cotton for its apparel. For this, it looks to Central Asian nations and India. Nonetheless, it is anticipated that America will rank among its top suppliers following the trade agreement with the US.
In 2024, India sold Bangladesh yarn made of man-made fiber ($85 million) and cotton ($1.6 billion). A significant amount of this was transported via land ports. However, following Sheikh Hasina’s coup on August 5, 2024, ties between the two nations deteriorated.
Relationship tensions increased after India awarded Sheikh Hasina political refuge. On April 13, 2025, Bangladesh responded by outlawing the land importation of Indian cotton. As a result, starting on May 16, 2025, India prohibited the land import of a number of Bangladeshi goods, including ready-made clothing. The biggest supplier of ready-made clothing to India is Bangladesh.
Bangladesh intends to buy cotton from the US rather than India amid tense relations. The biggest market for Bangladeshi textiles is the United States. Bangladesh thinks the textile industry will greatly benefit from the inclusion of cotton purchases in its trade agreement with the United States.
Professor Salim Jahan, a prominent economist at Brac University, told The Hindu that the deal had made Bangladesh a desirable location for American cotton growers. He did, however, add that it is still unclear if American cotton will be as high-quality as cotton from Egypt and India.
“The quality of cotton is the most important factor in the textile industry,” he stated. American consumers will not like our clothing either if American cotton does not satisfy requirements.
Additionally, according to Professor Jahan, America is far from Bangladesh, and as a result, shipping costs could rise sharply, lessening the benefit of the tariff exemption.
