Bangladesh Feels Trump Tariff Pain. Time For India To Grab Garment Export Pie

The new tariff regime places Bangladesh, Cambodia, and Vietnam squarely in Washington’s crosshairs, with elevated duties ranging from 20 to over 50 per cent. As global buyers scramble to reassess supply chains, one question is rising in strategic capitals: Could India be the geopolitical and economic beneficiary of this shake-up?

Pressure On Bangladesh

Nowhere is the pressure more acute than in Bangladesh, where the ready-made garment (RMG) sector forms the backbone of its economy, which in the last decade was seen to have joined the ranks of “Asian tigers”.

Bangladesh managed to leverage ultra-low labour costs, duty-free access to Western markets, and a focused industrial policy to become the world’s second-largest apparel exporter, earning the moniker “tailors to the world”. That model now faces existential risk.

From August 1, all exports from Bangladesh to the US will be subject to an extra 35 per cent tariff, up from an average of 15 per cent. This includes a punitive surcharge on textile products, which dominate the country’s exports of over US$ 8.4 billion to the US. For American importers, the calculus is now very different. For Bangladesh, the consequences could be economically devastating.

Bangladesh’s trade negotiators, who arrived in Washington on Thursday, are believed to have offered to buy more cotton, oil, soybeans, and Boeing aircraft to sweeten the deal and gain some tariff concessions.

However, it is to be seen what kind of deal the South Asian nation may be able to garner, as besides tariff talks, the US negotiators are believed to have brought in the extra complexity of labour standards, and demanded that Bangladesh, which has notoriously lax safety and labour standards, shape up.

Cambodia, too, is reeling under a 36 per cent tariff, which puts in jeopardy its more than US$ 12 billion annual shipments — most of it in garments and footwear — industries that account for nearly 70 per cent of its exports to the United States.

Vietnam, while more diplomatically agile, faces a negotiated 20 per cent tariff — still a significant increase from its previous rate of around 10 per cent. Products suspected of being trans-shipped from China face an even higher 40 per cent rate.

The collective outcome is clear: President Donald Trump’s USA is redrawing the terms of trade globally, and especially in the Indo-Pacific, and exporters from South and Southeast Asia will be forced to adapt.

However, some garment manufacturers feel that these Asian textile giants still have room to play.

Said Delhi-based garment exporter Maninder Singh, “Shirts which Bangladesh or Cambodian manufacturers sell to a US retail brand for US$ 5, is retailed at US$ 25. Even if the manufacturer’s price goes up by, say, US$ 1.50-2, due to the new tariffs, it can be absorbed by the manufacturer and the retailer by simply reducing their margins. Of course, brand owners who are large retail chains are usually fickle and can well migrate to another manufacturer in another geography, unless the manufacturer has a specific USP.”

An Opening For India

India, which has long been a second-tier garment exporter, despite its vast labour force, may now be positioned for an unexpected breakout.

“New Delhi is negotiating a bilateral trade agreement with Washington that could lock in a tariff of between 10-25 per cent lower, with possible exemptions or sector-specific relief,” said top Commerce Ministry officials.

Even without the final terms in place, the relative margin matters: American buyers now face significantly lower costs sourcing from India than from Bangladesh or Cambodia, and marginally lower than from Vietnam.

In 2024, India exported garments worth US$ 10.5 billion to the US, accounting for over 28 per cent of its total textile exports. “A tariff differential of even 10-15 percentage points — combined with India’s reliable port infrastructure, large labour pool, and political stability — could tilt sourcing decisions in its favour,” claimed the Ministry officials.

But this is not merely a story of margins. Global supply chains are undergoing a deeper structural transformation. The Covid-19 pandemic, the Russia-Ukraine war, and tensions in the Taiwan Strait have all pushed multinational firms to de-risk China-heavy operations.

Bangladesh and Southeast Asian nations, which have close military links with China, were earlier considered a reliable alternative. Now, they are increasingly seen as at risk of both political instability and punitive tariffs.

India’s Edge Is Limited

Yet, India’s advantage is not absolute. The country’s textile ecosystem is still burdened by high logistics costs, bureaucratic delays, and fragmented manufacturing clusters. While India excels in natural fibre apparel — cotton shirts, women’s suits, men’s blazers — it continues to lag in synthetic and man-made fibre (MMF) segments, where Bangladesh and Vietnam dominate.

Moreover, the actual tariff advantage may be narrow. If India’s effective rate is only 3-4 percentage points below Vietnam’s, many buyers may still prefer the scale, speed, and production efficiency offered by the Southeast Asian rival.

To fully leverage the opportunity, India would need to scale up quickly. That includes investing in modern textile parks, rolling out PLI schemes tailored for MMF apparel, and ensuring policy stability that can attract large-scale foreign investment.

Post Tariffs: The LDC Question

For Bangladesh, the current storm is only the beginning. The country is set to graduate from the Least Developed Country (LDC) status in 2026, which will automatically end its preferential access to the European Union — the other major pillar of its export architecture.

The end of tariff preferences in both the US and EU will see Dhaka facing a level playing field, which may go against it, especially as it is already facing huge economic challenges, with low forex reserves and high double-digit inflation.

For Bangladesh, where garments account for roughly 85 per cent of exports and employ over four million people, the timing of the tariff hikes and the LDC question it is now facing couldn’t have been worse.

Since the beginning of 2024, Bangladesh has witnessed the closure of 113 garment factories, resulting in the loss of 96,000 jobs. Among the hardest hit is the once-mighty Beximco Group, which shut down 16 units and laid off 40,000 workers by March 2025.

The damage isn’t limited to the factory floor. Supporting sectors — packaging, logistics, finance — have also seen downturns. Bangladesh’s GDP growth projections for FY2024-25 have been revised downward to 3.3-4.9 per cent.

Realignment Or Reset?

The implications of this tariff realignment extend beyond garments or trade balances. They speak to a broader strategic reordering in the Indo-Pacific. Countries like India, Thailand, and Indonesia may now be asked to play larger roles in global supply chains — not just to replace China, but to replace each other as tariff shocks and regulatory shifts redraw the map.

If India can capitalise on this moment — with smart industrial policy, nimble diplomacy, and investment in infrastructure — it could emerge as a new engine of labour-intensive exports. India’s textile industry may also have to rethink its geographical location.

As wage differentials between the poorer states of eastern Indian and those of western and southern India rise, many of them will have to consider relocating factories or building new plants in eastern states like Jharkhand, Odisha, and West Bengal.

The door is open. But whether New Delhi walks through it remains to be seen.