On January 27, 2026, India and the European Union concluded a comprehensive Free Trade Agreement dubbed the ‘mother of all deals.’ The pact eliminates duties on more than 99% of Indian exports to the EU — including apparel and textiles, which previously faced tariffs of 9–12%, and leather and footwear, which faced up to 17%.

For Bangladesh, the implications are severe. Bangladeshi garments entered the EU duty-free under the Everything But Arms scheme for least-developed countries, while Indian goods faced those 9–12% tariffs. That margin — a structural price advantage — is now gone. India has a vertically integrated ‘cotton-to-garment’ supply chain that Bangladesh cannot match. Bangladesh imports over 85% of its raw materials.

The timing compounds the damage. Bangladesh graduates from LDC status in November 2026. During a three-year transition period, duty-free access continues. But from November 2029, if Bangladesh has not secured GSP+ eligibility or a bilateral arrangement, tariffs on Bangladeshi apparel could snap back to approximately 12% — exactly when India pays zero. Modelling by RAPID estimates garment export losses of over $5.7 billion in that scenario, and a 36.5% total export decline under GTAP simulation.

Trade analysts are clear: the response must go beyond tariffs. EU due diligence laws, mandatory sustainability disclosures, CBAM carbon pricing, and the Digital Product Passport create a multi-layered compliance environment. A Bangladesh that can demonstrate ESG credibility — environmental performance, social standards, transparent governance — has a differentiating argument even at tariff parity. Without that, price competition alone against India and Vietnam will be very difficult to win.

THE TARIFF GAP — BEFORE AND AFTER

PROJECTED EXPORT IMPACT — RAPID & GTAP MODELLING