The shares of Indian textile companies dropped in trade on February 10 after US and Bangladesh announced the conclusion of their agreement on reciprocal trade. This comes after the stocks sharply surged earlier following the announcement of India-US trade framework.

Gokaldas Exports shares plunged more than 5 percent to trade at Rs 796.45 apiece, while KPR Mill and Arvind shares dropped over 4 percent. Pearl Global Industries shares fell more than 3.5 percent.

Why are textile stocks falling today?

As part of their agreement, US committed to build a mechanism that will allow for certain textile and apparel goods from Bangladesh to receive a zero reciprocal tariff rate. "This mechanism will provide that a to-be-specified volume of apparel and textile imports from Bangladesh can enter the United States at this reduced tariff rate, but this volume shall be determined in relation to the quantity of exports of textiles, e.g. U.S. produced cotton and man-made fiber textile inputs, from the United States," a joint statement read.

According to the recently announced trade framework between US and India, the former will effectively reduce the reciprocal tariff on Indian textile exports to 18 percent from the current 50 percent. While Indian textile exporters will enjoy a lower tariff rate than current levels, they will face strong competition as Bangladeshi peers will enjoy zero reciprocal tariffs on their textile exports to the US.

The overall US tariff rate on Bangladeshi exports meanwhile has been reduced to 19 percent, slightly higher than India's 18 percent rate.

“The Agreement will provide U.S. and Bangladeshi exporters unprecedented access to each other’s respective markets.  The Agreement will build upon our longstanding economic relationship,” the two countries said in their joint statement.

India-US trade deal framework:

India and US on February 6 released a framework for an interim agreement regarding reciprocal and mutually beneficial trade (Interim Agreement). "Today's framework reaffirms the countries’ commitment to the broader U.S.-India Bilateral Trade Agreement (BTA) negotiations, launched by President Donald J. Trump and Prime Minister Narendra Modi on February 13, 2025, which will include additional market access commitments and support more resilient supply chains," the countries said in a joint statement.

India and US said that their interim agreement will represent a "historic milestone" in their partnership, which would demonstrate a common commitment to reciprocal and balanced trade based on mutual interests and concrete outcomes.

According to the framework, US agreed to reduce its tariffs on Indian exports of textile and apparel, leather and footwear, plastic and rubber, organic chemicals, home décor, artisanal products, and certain machinery to 18 percent, subject to the successful conclusion of the Interim Agreement.