US-China cotton deal set to reshape global trade flows; India eyes new markets

A new trade deal between the United States (US) and China is set to reshape the global cotton landscape – and India is watching closely. Under the agreement, China has pledged to purchase 25 million tonnes (mnt) of US soybeans annually, along with substantial volumes of American cotton and sorghum, marking a thaw after years of tariff friction. This is set to redraw global trade patterns, with Indian exporters likely to become more focused on diversifying to new markets.

Over the past two years, China’s reduced buying from the US has allowed India to expand exports to Asian and Middle Eastern markets. As such, for Indian exporters, who had briefly benefited when Beijing curbed US cotton imports, this détente brings both opportunity and caution. In FY’25, India exported around $6.4 billion worth of cotton, with Bangladesh, Vietnam, and China accounting for over 55% of shipments. Meanwhile, the country’s broader merchandise exports grew 6.7% y-o-y to $36.38 billion in September 2025, even as exports to the US declined by 11.9% to $5.46 billion (The Economic Times).

In the cotton and apparel segments, the shift in Indian export basket is evident: exports of cotton readymade garments to the UAE, France, and Japan rose even as US shipments fell nearly 25%, reflecting India’s growing reliance on non-US destinations. “New buyers from the UAE and Vietnam have helped offset the fall in American orders,” said a Tiruppur-based exporter.

Domestically, India remains a powerhouse – producing about 31-33 million bales annually. Yet subdued Western demand has pressured prices, pushing mills to import more cotton lint. With the US-China cotton deal potentially redirecting global flows, India’s diversification strategy – anchored in Asia, the Middle East, and Africa – has become more crucial than ever to sustain export momentum and safeguard its textile value chain.

As China resumes large-scale purchases of US cotton, global benchmark prices could firm up in the coming months. This may create mild upward pressure on Indian domestic prices, particularly if export parity improves. However, with healthy domestic production and a temporary waiver of the 11% import duty on cotton, price spikes are likely to remain contained. Traders expect Indian cotton to stay in the INR 60,000-62,000 per candy range through early 2026, barring any weather or logistics disruptions. In essence, India’s market may witness steady prices – a reflection of renewed global cotton trade activity driven by the US-China truce.