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In response to the US reciprocal tariff now cut to 20 per cent, Bangladesh's textile and spinning millers are set to significantly increase American cotton imports. The move comes under a trade-off arrangement designed to make the country's apparel exports more competitive in the US market.
Under the latest US Presidential actions, export goods entering the American market must use at least 20 per cent of the customs value of the product in US-origin content to qualify for partial duty exemptions under US Customs and Border Protection (CBP) provisions. In practice, this means that at least one-fifth of a product's value must come from US sources to receive preferential treatment. The tariff reduction applies only to the US-origin portion, while the non-US portion remains subject to the standard tariff.
To illustrate, US customs will apply the tariff only on the non-American share of a product's value, provided the 20 per cent US-content threshold is met. For example, a T-shirt valued at $10 with 20 per cent US-origin content would face a tariff of $1.60 instead of $2. The 20 per cent tariff rate -- applicable to Bangladesh -- would be calculated solely on the $8 non-US portion.
Speaking at a press briefing, the President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said the measure presents a unique opportunity to reduce export costs and strengthen Bangladesh's position in the American market. The US Customs and Border Protection (CBP) will have authority to verify compliance, requiring importers to provide documentation on the proportion and value of US-origin materials. This verification aims to ensure only eligible products enjoy reduced duties.
Industry insiders say the new condition will drive an increase in US cotton imports, potentially doubling current volumes by year-end. A practical example comes from denim trousers with an FOB (Free On Board) value of around $8, where the fabric component accounts for roughly $4.125. Of this, cotton makes up about 33.25 per cent -- comfortably above the required threshold. Even in cases of lower-value brands, such as Kontoor, the cotton content typically remains high enough to qualify.
The owner of a large apparel company noted that his facilities produce around 54 million yards of denim annually, with 60 per cent destined for the US market. The company imports 24,000 tonnes of cotton each year, of which only 15 per cent currently comes from the US. Plans are now in place to increase the share of US cotton imports by nearly 60 per cent to capitalise on the tariff advantage.
A former BGMEA president added that the requirement for US raw materials, alongside local value addition, could spur investment in Bangladesh's spinning and textile mills, thereby generating new employment opportunities.
While US cotton is generally more expensive than cotton from other countries, exporters have little choice but to adopt it when targeting the US market. Industry stakeholders expect US brands and retailers to demand US-origin cotton in their orders to benefit from the tariff concessions, making the sourcing decision less about preference and more about market access.
Currently, Bangladesh imports over $4 billion worth of cotton annually, including around $500 million from the US. Domestic production falls far short of demand, forcing manufacturers to rely heavily on imports -- a situation that naturally supports a pivot toward US cotton for garments bound for America. Some factories already use as much as 40 per cent US-origin material, meaning the 20 per cent tariff would apply to only 60 per cent of the product's value, lowering overall duty costs even further.
According to the US Department of Agriculture (USDA), Bangladesh is projected to remain the world's largest cotton importer in 2025-26, with imports expected to reach 8.5 million bales. The USDA also forecasts a modest recovery in global cotton consumption, set to hit a five-year high of 118.1 million bales, driven largely by strong demand in textile-exporting countries such as Bangladesh and Vietnam. Global cotton trade is expected to rise by 2.3 million bales to 44.8 million bales in 2026, signalling a broad-based recovery in textile production.
To support this momentum, the Bangladesh government is finalising a dedicated bonded warehouse facility to ensure duty-free access for US cotton. Chief Adviser Muhammad Yunus has also written to the US President, pledging a substantial increase in US farm imports -- particularly cotton -- as part of a broader trade diplomacy effort to reduce bilateral trade imbalances.
As part of this strategy, Bangladesh is drafting a roadmap to double US cotton imports by 2028, targeting a 25 per cent share of total cotton supply from American growers. Based on 2024 projections, imports from the US are set to grow from 1.0 million bales in 2025 to 2.1 million bales by 2028. The US share of Bangladesh's cotton imports will climb from 12 per cent to 25 per cent over that period, with the import value nearly doubling from $473.8 million to $987.04 million.
This shift aligns with Bangladesh's recent strong export performance. Garment export from the country surged 13.79 per cent year-on-year to $7.55 billion in FY2024-25, according to the Export Promotion Bureau (EPB). Maintaining this momentum will require strategic adaptation to new trade conditions, including compliance with US content requirements.
Although initial concerns were raised about the implications of the new tariff structure, the outlook appears positive than many anticipated. However, clarification as to the extent of duty waiver will make things easier to grasp. The coming months will determine how well exporters adapt to the evolving trade regime and whether this policy shift translates into sustained market gains.
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