Major Impacts
U.S.-China Trade War and Tariff Escalation
The bilateral tariff escalation between the U.S. and China has been the single most disruptive force in cotton markets over the past two years. China accounts for more than 30% of global cotton mill consumption. When Chinese buyers reduce U.S.-origin purchases in response to tariffs, global price signals deteriorate rapidly, regardless of actual supply conditions.
India’s Structural Shift to Net Importer
India’s transition from net exporter to net importer is one of the most significant structural changes in global cotton markets in a decade. India is the world’s largest cotton producer by acreage. When it moves from exporting to importing, it removes supply from the global market and simultaneously adds import demand. The doubling of Indian cotton imports in 2024/25 tightened the global balance more than most models anticipated.
Brazil’s Rise as the Dominant Exporter
Brazil is now the world’s largest cotton exporter by volume. Brazilian exports of 12.4 million bales in 2023/24 contributed to price pressure when demand was soft, but also mean that any disruption to Brazilian production now has a global price impact that it previously did not. The Brazilian currency weakness against the U.S. dollar in 2025 added additional pressure on domestic Brazilian prices, but supported export competitiveness.
Weather and Climate Risk
Persistent dry weather in India and the risk of a Super El Niño affecting key growing regions have been cited as the primary drivers of the 2026 price rally. El Niño events historically correlate with below-average monsoon rainfall in South Asia, the region that grows more cotton by acreage than anywhere else in the world. Drought in West Texas, one of the U.S.’s primary growing regions, has also been a persistent factor. These are not one-off events; they are becoming structural features of cotton price risk.
What Sourcing Teams Should Do:
Review open contracts
Review any open cotton and cotton-blend fabric contracts not yet locked. The 18% YTD price rise means Q1 2026 cost assumptions are out the window.
Be aware of supply and demand dynamics
Watch the July USDA supply and demand update. It will set the tone for H2 price negotiations with mills and fabric suppliers.
Build in a buffer for Indian cotton
For brands with significant cotton exposure in India-origin supply chains, build a 10–15% buffer into pricing assumptions.
Keep an eye on natural/synthetic cost gaps
Natural fiber-dominant specs are becoming more expensive relative to synthetics as the cotton/polyester staple fiber spread normalizes. Run the cost comparison by category. For price-sensitive ranges, blends may be warranted.
Do not assume Xinjiang cotton availability returns to 2024 levels. The 10%+ planting area reduction is policy-driven and will persist into 2027/28.
Watch China’s target planting
If China’s deliberate reduction of Xinjiang cotton planting area happens it will have lasting effects. The market faces a meaningful structural tightening in 2027/28 that current prices are beginning to anticipate.
This story originally ran as part of HGI’s 2026 Fiber Outlook Report. To learn more about how geopolitical conflict, shifting trade policy, climate risk, new sustainability regulations and evolving consumer expectations are affecting how natural and man-made fibers are produced, sourced and priced, download the report here.
