The US apparel sourcing landscape is entering a new phase as revised Section 301 tariffs reshape the cost equation for major Asian suppliers. While the overall US apparel market has weakened in the first half of 2026, the impact has varied sharply by sourcing country, creating both opportunities and new strategic challenges for Bangladesh.
The latest tariff structure, effective from July 24, places Bangladesh, Cambodia, Indonesia and Malaysia under a 10% Section 301 rate, while China, Vietnam and several other economies face 12.5%.
The US government has also indicated plans to establish tariff-rate quotas (TRQs) for Bangladesh and the other 10% countries, allowing qualifying textile and apparel products linked to imports of US cotton and textile inputs to enter at preferential or zero Section 301 rates once the mechanism is operational.
The development is significant for Bangladesh because the country has one of the world’s largest cotton-based apparel manufacturing ecosystems. At the same time, the changing US market is exposing a structural weakness: Bangladesh remains less competitive than some Asian rivals in man-made fiber (MMF), synthetic and performance apparel.
According to Office of Textiles and Apparel (OTEXA) data cited in recent industry analysis, total US apparel imports reached about $35.09 billion in January–June 2026, down 8.04% from the same period a year earlier. Import volume declined 8.50%, while average unit prices increased 0.50%. The combination points to weaker overall demand and more cautious sourcing by US brands and retailers.
The contraction is part of a broader adjustment in the US apparel market. In 2025, total US apparel imports were valued at $77.88 billion, down 1.74% from 2024, while import volume fell 3.70%. Despite the overall decline, Bangladesh’s exports to the US increased 11.71% to $8.20 billion, lifting its US market share to 10.53% from 9.26% in 2024. Bangladesh became the third-largest apparel supplier to the US for the full year, while Vietnam overtook China to become the largest.
The first quarter of 2026 showed how quickly this competitive ranking can change. US apparel imports from the world fell 11.63% to $17.73 billion in January–March, while Bangladesh moved ahead of China to become the second-largest apparel supplier to the US during the quarter, according to OTEXA data.
Cotton is gaining share in the US market
One of the most important developments for Bangladesh is the changing fiber mix of US apparel imports.
Cotton apparel accounted for 39.9% of US apparel import volume in 2025, compared with 38.5% in 2024 and 37.8% in 2023. Meanwhile, MMF apparel’s share declined to 56.6% in 2025 from 57.9% in 2024 and 59% in 2023.
The shift gives Bangladesh an immediate advantage because its manufacturing base is heavily concentrated in cotton products such as T-shirts, knitwear, trousers, sweaters and basic woven garments.
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However, the trend should not be interpreted as a decline in the importance of synthetic apparel. MMF products still represent more than half of US apparel import volume. This makes the fiber shift a relative opportunity for Bangladesh rather than a reason to delay investment in synthetic manufacturing.
Supplier performance is becoming increasingly divergent
The latest trade environment is producing very different results across Asian suppliers.
China has experienced the most severe erosion in the US apparel market. Its apparel import volume declined by more than 37% during the first half of 2026, while exporters reportedly reduced average unit prices by roughly 15.4% in an effort to defend market share.
Vietnam has shown greater resilience. Its apparel import value increased by about 1.08%, supported by its deep MMF, activewear, sportswear and synthetic textile supply chains. The country’s strength in man-made fibers remains one of its biggest advantages as US brands diversify sourcing.
Cambodia has also performed strongly, with US apparel import volume rising 14.59% in the first half of 2026. Its lower Section 301 exposure, combined with its established garment manufacturing base, could make it attractive for cost-sensitive orders.
The divergence demonstrates that tariffs alone do not determine sourcing decisions. Product capability, lead time, production scale, fabric availability, compliance, quality consistency and supply-chain integration remain critical. Nevertheless, when buyers and suppliers are operating under tighter margins, even a few percentage points of tariff difference can influence new-order allocation.
Bangladesh records a mixed first-half performance
Bangladesh has not yet fully translated its relative tariff advantage into higher US apparel exports.
During the first half of 2026, Bangladesh’s apparel exports to the US reportedly declined 5.75% in value and 3.69% in volume. However, June provided a more encouraging signal: export value increased 5.74% year on year to $763.57 million, even as the average unit price fell 2.15%.
The June increase is important because it suggests that Bangladesh remains capable of attracting US orders when buyers prioritize competitive pricing and cotton-product capacity.
But lower unit prices also highlight the pressure exporters are facing. Winning additional orders through price competitiveness alone could squeeze factory margins unless productivity, efficiency and product value improve simultaneously.
The biggest long-term challenge is MMF
Bangladesh’s cotton strength is now both an advantage and a warning.
The country’s large spinning, knitting, weaving and garment manufacturing ecosystem has made it highly competitive in cotton apparel. Yet the global apparel market is increasingly diversified toward polyester, nylon, elastane, recycled fibers, technical fabrics and performance products.
Vietnam’s success illustrates the commercial value of a more diversified fiber base. Its ability to supply synthetic fabrics and finished MMF garments allows it to participate in categories such as sportswear, activewear and technical apparel where Bangladesh has a comparatively smaller presence.
For Bangladesh, closing this gap will require investment well beyond garment factories. The country needs greater capacity in synthetic-fiber production, polymer and filament processing, spinning, weaving, knitting, dyeing and finishing.
Reliable electricity and gas supplies are equally important because many synthetic textile processes are energy-intensive. Without dependable utilities, Bangladesh risks losing part of the cost advantage it needs to compete in higher-value MMF categories.
US cotton could create another competitive advantage
The new US tariff framework could also create an additional opportunity through the proposed TRQ mechanism.
The White House has directed the US Trade Representative to establish TRQs for Bangladesh, Cambodia, Indonesia and Malaysia based on their purchases of US cotton and textile inputs. The objective is to encourage these countries to source more US cotton and reduce dependence on inputs from other origins. Until the TRQs are formally established, the applicable 10% Section 301 rate remains in place for the covered textile and apparel products.
For Bangladesh, this could be particularly relevant because of its strong cotton-apparel specialization.
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If implemented effectively, greater use of US cotton or qualifying yarn could improve the landed-cost position of eligible Bangladeshi garments. However, the benefit will depend on the final TRQ rules, qualifying product categories, volume limits and documentation requirements.
That makes traceability increasingly important. Bangladeshi exporters will need reliable records showing where cotton, yarn, fabric and other inputs originated and how they moved through the production chain. Digital supply-chain documentation could therefore become a commercial advantage rather than simply a compliance requirement.
Bangladesh needs a two-track sourcing strategy. In the short term, Bangladesh should capitalize on its strongest asset: cotton apparel.
The combination of a 10% Section 301 rate, a large production base, competitive manufacturing costs and the possibility of future cotton-linked TRQs could strengthen Bangladesh’s position as US buyers continue diversifying away from higher-tariff suppliers. But the longer-term strategy must be broader.
Bangladesh needs to simultaneously develop MMF capabilities, improve energy and logistics infrastructure, raise productivity, expand higher-value product categories and strengthen supply-chain traceability.
The objective should not simply be to capture orders diverted from China or other higher-tariff suppliers. It should be to build a more diversified apparel industry capable of competing across cotton, MMF, activewear, performance wear and other growing segments.
The next several months will be critical. July–September OTEXA data should provide a clearer indication of whether the first-half sourcing changes represent temporary adjustments or the beginning of a more structural reallocation of US apparel orders.
For Bangladesh, the message is increasingly clear: the tariff shift may open the door, but product diversification, MMF investment, reliable infrastructure and traceable supply chains will determine how far the industry can go through it.