Maeen Md Khairul Akter, Managing Editor, Textile Focus
Bangladesh’s apparel exports reached $38.82 billion in 2025. Vietnam reached $39.64 billion. A gap of $817 million — less than a rounding error by the standards of global trade — was enough to push Bangladesh from second to third in the global garment export rankings, a position it had held since reclaiming it from Vietnam in 2021. The industry’s initial response has been to call it a blip, to point to political disruptions, to cite eight difficult months and expect recovery. That response may be underestimating what is actually happening.
The first-half export data for 2026, from EPB figures, does not suggest a clean recovery. Total RMG exports from January to June 2026 stood at $19.34 billion, a decline of 0.63 percent against the same period in 2025. The picture within that number is volatile: February was down 13.21 percent year on year, March plunged 19.35 percent — the sharpest single-month contraction in recent memory — before April swung to a 31.21 percent rebound and June posted 21.52 percent growth. The knit sector, which drives the majority of volume, was down 1.80 percent across the half. Woven managed a marginal 0.68 percent gain. This is not the trajectory of a sector bouncing back from a temporary shock. It is the trajectory of a sector caught in crosswinds it does not yet have a strategy for.
The recent export trend, industry-strategy, and the competitor’s performance shows one thing. The countries Bangladesh is competing against today are not the ones it was competing against in 2015. The strategy built for that older competition is showing its age, and the ranking slip is the first visible symptom of a structural mismatch that has been building for several years.
The Vietnam Gap is Structural, Not Cyclical
Vietnam did not overtake Bangladesh by working harder or cutting prices. It overtook Bangladesh because it made a series of strategic bets a decade ago that are now paying dividends. The Vietnam-EU Free Trade Agreement came into force in 2020, with apparel tariffs phasing to zero by January 2026 for products meeting yarn-forward rules of origin. Vietnam built the upstream capacity — yarn, fabric, finishing — to meet those rules. The payoff is that Vietnamese garments now enter the EU duty-free while Bangladesh’s exports, still protected under EBA preferences until 2029, are already being priced by buyers against what happens after that deadline.
In the United States, the gap is even starker. Vietnam holds a 21.5 percent share of US apparel imports. Bangladesh holds 10.5 percent. Vietnam is not slightly ahead — it is twice the size in America’s single largest import market. That divergence reflects years of US brand consolidation toward Vietnamese factories, driven by product diversity, technical garment capability, and Vietnam’s ability to handle complex fabrications that Bangladesh’s largely cotton-and-basics supply chain is not optimized for.
India Has Changed the Game Overnight
If Vietnam was the known threat, India is the new one — and it arrived faster than most people in Dhaka anticipated. In February 2026, India signed a bilateral trade agreement with the United States that cut effective US tariffs on Indian goods from levels approaching 50 percent down to 18 percent. Simultaneously, India finalised an EU Free Trade Agreement that eliminates duties on 99.5 percent of Indian exports by value, including textiles and apparel that previously faced tariff rates of 10 to 26 percent. India now has preferential or improving access to the three largest apparel import markets in the world — the United States, the European Union, and the United Kingdom — simultaneously.
India’s textile exports were $36.61 billion in FY2025-26, up 6.32 percent year on year, with projections of monthly double-digit growth as the trade agreements take effect. India has a domestic cotton base, strong synthetic and man-made fibre capacity, a larger manufacturing workforce than Bangladesh, and, crucially, it does not face an LDC graduation cliff in 2029. The competitive framing that placed India as a slower, higher-cost alternative to Bangladesh is no longer accurate. India is accelerating into exactly the market access window that Bangladesh currently occupies.
The Competition Bangladesh Prepared For vs The One it Faces
Bangladesh’s export strategy, its industry associations’ positioning, its government’s trade diplomacy, and its factory investment decisions have all been shaped by a competitive map that centred on China plus Vietnam. That was the right map for 2015. Today’s map includes Vietnam with zero-tariff EU access, India with dual FTA coverage and a growing product range, Indonesia expanding steadily, Cambodia holding its position, and Pakistan pushing aggressively in denim. The field has widened and deepened while Bangladesh has largely been defending the position it built rather than actively expanding it.
The fundamental advantage Bangladesh built — LDC preferences combined with low labour costs and large-scale volume production in basics — was always a temporary architecture. Every country that has risen through apparel exports has used preferential access as a launch pad for investment in product diversification and upstream integration. Vietnam followed exactly this playbook after sealing its agreements with the US and then the EU, scaling apparel exports from under $5 billion in 2005 to nearly $40 billion today. Bangladesh’s launch pad has been extended twice through GSP transitions, long enough that parts of the industry appear to have confused the launch pad for the destination.
What a Realistic Response Looks Like
Bangladesh is not without strengths. Its scale remains formidable. It leads the world in LEED-certified green factories. Its denim sector is ahead of China in EU and US export volumes. Its workforce is experienced and its logistics infrastructure, while imperfect, is substantial. These are real assets. But they are insufficient on their own for the competition that is now taking shape.
A realistic response requires Bangladesh to acknowledge, plainly, that it slipped to third because that is where its trade policy investment and industrial strategy have positioned it — not because of a bad year. The H1 2026 data makes this harder to dismiss. Vietnam’s EVFTA was a political decision taken years before the commercial payoff arrived. India’s FTA coverage was the result of sustained diplomatic effort. Bangladesh needs to name the gap between its current competitive position and the one it intends to hold, and then build the trade agreements, product diversification strategy, and upstream investment program that actually closes it. Third place is a warning. The question is whether it is being read as one.
