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How India’s recent trade deals altered the regional dynamics

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What began as a diplomatic triumph is now rewriting commercial equations, and leaving India’s competitors under pressure. India’s much-publicised Free Trade Agreement with the European Union, grandly billed by industry as the “mother of all agreements,” had barely been finalised when another seismic shift followed. In a decisive move, the United States has decided to cut tariffs on Indian exports from a steep 50 per cent to a far more manageable 18 per cent.

India-EU free trade agreement and the recent tariff cut by the US to 18 per cent positioned India among Asia’s most competitive apparel exporter destinations.
Competitors such as Bangladesh, Vietnam and Malaysia face higher duties, raising concerns over lost competitiveness, especially for garments, and prompting urgent calls for policy and diplomatic action.

Together, the twin breakthroughs have dramatically altered the equation, redrawing the competitive landscape, even as India’s rivals monitor the developments closely.

Vietnam is subject to 20 per cent duties, Malaysia 19 per cent, Bangladesh 20 per cent, Cambodia 19 per cent and Thailand 19 per cent.

In India, the mood is unmistakably buoyant. The long-standing uncertainty over market access, tariffs and trade preferences has given way to something the industry has not felt in a while: clarity and confidence.

Dharani Kanth Koganti, director of the Kakatiya Mega Textile Park in Telangana (India), speaking to Fibre2Fashion, summed up the prevailing sentiment when he described the 18 per cent US tariff combined with the EU FTA as a decisive turning point, one that finally puts lingering doubts to rest.

From Tiruppur, India’s knitwear nerve centre, Ess Tee Exports chairman N Thirukkumaran echoed the optimism, noting that India now sits among the most competitive Asian exporters on the tariff front, setting the stage for substantial export growth.

While Indian factories hum with optimism, competitors are assessing the situation rather cautiously, and Bangladesh, long regarded as the undisputed low-cost champion of global garment exports, is not an exception. As per media reports, the country’s export sector has come under renewed pressure following the US decision to reduce tariffs on Indian goods, a move that came close on the heels of India’s EU agreement signed on January 27.

Trade experts in Dhaka have reportedly warned that the widening tariff gap could seriously undermine Bangladesh’s readymade garment exports to the US, a market already marked by intense price sensitivity.

The anxiety does not stop there. Looming large is the prospect of losing preferential access to the European Union after 2026, when Bangladesh graduates from Least Developed Country status.

Europe is Bangladesh’s single largest export destination, and the possible erosion of duty-free access under the Generalised System of Preferences has raised serious concerns. The risk is compounded further by the India–EU agreement, covering a market of nearly 2 billion people and a quarter of global GDP, which will remove tariffs on 90 per cent of Indian goods—expanding to 93 per cent within seven years.

Even if Bangladesh manages to qualify for GSP Plus post-graduation, industry stakeholders cautioned that garments are unlikely to enjoy duty-free treatment under the current framework.

Speaking to the media, a senior official of a major Bangladeshi trade body underlined that while India faces a reciprocal tariff of just 18 per cent in the US, Bangladeshi exporters are burdened with a combined duty of around 35 per cent—15 per cent in customs duties and another 20 per cent as a reciprocal tariff.

That differential, industry insiders cautioned, threatens to tip buyer preference decisively in India’s favour. Calls are thus growing louder for Dhaka to urgently ramp up diplomatic engagement and policy support to prevent any erosion of export competitiveness.

Meanwhile, in the wake of India’s trade agreement with the EU, a prominent Bangladeshi exporter reportedly dismissed the notion that Bangladesh has no competitors, arguing that India remains a serious low-cost rival while claiming that wages are low in many Indian states.

With India leveraging back-to-back deals to widen its export advantage, competitors are now being compelled to rethink strategies and realign their game plans in line with the changing dynamics or risk being left behind.

Fibre2Fashion News Desk (DR)



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