EU-India Trade Deal Puts Bangladesh's Economic Lifeline at Risk

€22 billion in annual trade hangs in the balance. On January 27, 2026, the European Union and India concluded what Ursula von der Leyen called the "mother of all deals" – a comprehensive free trade agreement that promises to reshape South Asian economics. For Bangladesh, however, this historic pact signals an existential threat to the foundation of its export economy.

The numbers tell a stark story. The EU will eliminate tariffs on 90% of Indian goods immediately, rising to 93% within seven years. For Bangladesh, watching from the sidelines, this represents the erosion of decades-old competitive advantages built on preferential market access.

The Tariff Cliff Approaches

Bangladesh's vulnerability lies in its concentration. The EU absorbs 44% of Bangladesh's total exports, with textiles and apparel comprising 94% of all EU imports from the country. This isn't diversification – it's dependence.

The FTA's sectoral details are particularly damaging. EU tariffs on Indian textiles and apparel, previously ranging from 9-12%, drop to zero. Leather and footwear, which faced duties up to 17%, receive similar treatment. Meanwhile, Bangladesh's current tariff-free access under the "Everything But Arms" scheme expires in November 2029, potentially triggering a 12% duty on its apparel exports.

The competitive mathematics are brutal: India at 0% versus Bangladesh at 12% would render many Bangladeshi manufacturers unviable overnight.

Supply Chain Realignment

India's advantages extend beyond tariff elimination. Its vertically integrated "cotton-to-garment" supply chain offers EU buyers reduced lead times and supply chain risks. The FTA's provisions on regulatory predictability and trade facilitation may encourage European firms to place their "China+1" capacity expansions in India rather than Bangladesh.

EU buyers, already sensitive to price fluctuations in basic apparel, can now diversify orders to India without paying a tariff premium. This shift could begin immediately, even before Bangladesh loses its preferential status.

Strategic Response Options

Bangladesh isn't without recourse. The country recently concluded its fifth round of negotiations for a Comprehensive Partnership and Cooperation Agreement (PCA) with the EU on January 8 – just weeks before the EU-India deal was finalized. This timing offers diplomatic leverage to secure a durable trade framework.

The immediate priority is achieving GSP+ eligibility by meeting the EU's 32 international conventions on labor rights, human rights, and environmental protection. This would provide a bridge beyond the 2029 cliff.

*Competitiveness must evolve beyond price.* Bangladesh leads the world in LEED-certified green garment factories, positioning it well for the EU's increasing focus on sustainability standards. Moving beyond "fast fashion" basics toward design, man-made fiber products, and high-end manufacturing becomes essential.

The New Trade Hierarchy

The EU-India FTA represents more than bilateral cooperation – it signals Europe's strategic pivot toward India as its preferred South Asian economic partner. This reshuffling of trade relationships reflects broader geopolitical realignments and the EU's desire to diversify away from China-centric supply chains.

For Bangladesh, the agreement compresses what was once a long-term challenge into an immediate crisis. The country built its "export miracle" on preferential access and industrial discipline. The next phase of its economic story will be defined by its ability to compete without those advantages against a neighbor that has just secured its own preferential highway to Europe.