Textile Stocks: Several textile stocks, from KPR Mills to Vardhman Welspun Living, are faltering in the stock market today. This is especially true after the trade deal between Bangladesh and the United States.

Bangladesh signs trade deal with the US, while textile industry stocks plummet.

Textile Stocks: Bangladesh has reached a trade deal with the United States ahead of the general elections scheduled for February 12th. Under this deal, US tariffs on Bangladesh have been reduced from 20% to 19%. According to this agreement, the US will provide exemptions for Bangladesh's textile and apparel products.

The deal also stipulates that imports of Bangladeshi textiles and ready-made garments made from American cotton and man-made fibers may be exempt from tariffs. This will obviously boost Bangladesh's textile exports to the United States, which is already a major market for Bangladesh's textile industry. 

Big fall in shares

During stock market trading on Tuesday, several textile stocks, including KPR Mills, Vardhaman, Welspun Living, and Trident, crashed. KPR Mills shares fell 2.85 percent, Vardhaman Textiles fell 4.92 percent, Welspun Living fell nearly 2 percent, and Trident fell nearly 3 percent. 

What are investors afraid of?

Under the trade deal with the US, Indian textile exports will be subject to an 18% tariff, while Bangladesh is promised special relief with zero tariffs. Investors fear that they will face stiff competition from Bangladeshi textile products in the US market. Obviously, if Bangladesh exports garments using Bangladeshi cotton or fiber to the US, it will receive zero tariffs, while India's textile exports are exempt from such exemptions. India will have to pay an 18% tariff. Consequently, Bangladeshi products will become cheaper than Indian products in the US market. This will increase demand for Bangladeshi apparel rather than Indian apparel.

Investors also fear that if Bangladesh receives zero tariffs on the use of American cotton, it will purchase cotton from the US instead of India. This will harm cotton farmers and spinning mills in India. Bangladesh is a major buyer of cotton from India.