New Delhi/Washington: In a move that could cast a shadow over ongoing India-US trade negotiations, the United States has proposed imposing an additional 12.5% tariff on imports from India under Section 301 of the US Trade Act of 1974, citing concerns over inadequate measures to prevent the entry of goods produced through forced labour into global supply chains.The proposal, announced by the Office of the United States Trade Representative (USTR), is part of a wider action targeting 60 major trading partners. While a group of countries including Canada, the United Kingdom and Mexico may face an additional 10% duty, India, China, Japan, South Korea and several others have been placed in the higher 12.5% tariff category.
USTR has argued that the failure of trading partners to effectively curb imports linked to forced labour creates unfair competition for American workers and businesses. The proposed duties are the outcome of a Section 301 investigation launched in March this year against 60 economies, including India.The development comes at a delicate time as New Delhi and Washington are engaged in negotiations for a broader bilateral trade agreement. Trade experts believe the proposed tariffs could become a significant bargaining point in the talks, particularly as India seeks relief from existing and proposed trade restrictions.
Several products, including pharmaceuticals, energy products, rare earth materials, aircraft parts and certain agricultural commodities, have been exempted from the proposed tariff regime.The tariffs are not yet final. The USTR has invited public comments until July 6 and scheduled a public hearing on July 7 before taking a final decision.
Impact on India If implemented, the additional duties could affect India’s export competitiveness in sectors such as textiles, apparel, engineering goods, leather products and light manufacturing. The United States remains one of India’s largest export markets, and any increase in tariffs could impact exporters already facing uncertainty in global trade.
Why It Matters
The proposed action signals Washington’s increasing use of Section 301 investigations as a trade policy tool after earlier tariff measures faced legal challenges in US courts. Analysts see the forced labour probe as part of a broader effort by the Trump administration to rebuild its tariff framework while pursuing strategic trade objectives.
