The U.S. government has proposed to levy a tariff of 12.5% on imports from 54 countries, including India, that it says have “failed to impose and effectively enforce” prohibitions on the import of goods produced using forced labour.

In response, the Indian government has said it “remains engaged” with the U.S. government regarding this development as well as the finalisation of an Interim Agreement on trade.

The office of the U.S. Trade Representative had, in March this year, launched an investigation under Section 301 of the U.S. Trade Act of 1974 to look into whether its trade partners were taking enough steps to stop the import of goods that are made using forced labour.

The latest tariff announcements, as part of this investigation, are not final as yet. Countries, including India, can submit requests to take part in public hearings by June 22, submit written comments by July 6, and participate in the public hearings on July 7.

‘Will not tolerate’

According to trade experts, this was a tool for the U.S. to impose tariffs on its imports after the U.S. Supreme Court in February struck down the reciprocal tariffs — including the 50% levied on India — that had been imposed by U.S. President Donald Trump.

“The failure of our most important trading partners to address the importation of goods made with forced labour is unacceptable,” U.S. Trade Representative (USTR) Jamieson Greer said on June 2, as part of the announcement of the investigation findings. “This creates a dynamic where American workers are forced to compete globally on an uneven playing field. We will no longer tolerate this disparity,” he added.

Findings on India

According to the report released by the USTR, India is one of the 54 countries that were investigated and that were found to have “failed to impose and effectively enforce” prohibitions on the import of goods produced using forced labour.

“The results of this investigation indicate that the acts, policies and practices of India related to the failure to impose and effectively enforce a forced labour import prohibition are unreasonable and burden or restrict U.S. commerce,” the report said.

As a result, the USTR has proposed a tariff of 12.5% on imports from these 54 countries. This puts India in the same tariff bracket as several of its competitors, including Bangladesh, China, Malaysia, Thailand, and Vietnam.

The proposal by the USTR also includes a separate mechanism for textile and apparel products, under which a certain volume of imports from selected economies would be allowed to enter the U.S. at lower tariff rates.

According to Agneshwar Sen, trade policy leader at EY India, the impact of these tariffs on India could be multidimensional.

“In the near term, exporters in labour-intensive industries such as textiles, garments, carpets, leather products, and brassware could face at least an additional 10% levy under Section 301, adding to their existing tariff exposure,” Mr. Sen said.

“India should therefore submit detailed written representations by July 6 and participate proactively in the July 7 public hearing to challenge these conclusions,” he added.

‘Remain engaged with the U.S.’

“India remains engaged with the U.S. on the matter as a part of Section 301 proceedings,” the Ministry of Commerce and Industry said in a statement on June 3. “India is also parallelly engaged with the U.S. for finalisation of a framework agreement as was announced on February 2, 2026, and in accordance with the joint statement released on February 7, 2026,” he added.

A negotiating team from the U.S., led by Deputy USTR Brendan Lynch, is currently in India on a three-day visit to New Delhi that will conclude on June 4.

According to the Ministry of Commerce and Industry, the purpose of the trip is to “finalise the details” pertaining to the Interim Agreement between the two countries and take forward the negotiations on a broader Bilateral Trade Agreement (BTA).

According to Mr. Sen, negotiating a commitment at even a framework level that ensures the absence of forced labour import restrictions would be a strategically valuable outcome for India.

Tariffs by any means

According to trade experts, the Section 301 investigations are simultaneously a pressure tactic to push countries like India to move ahead with a trade deal with the U.S. and also a means to impose tariffs on imports into the U.S. by one means or another.

“Global Trade Research Initiative (GTRI) views the 12.5% tariffs as part of a broader effort by Washington to increase pressure on India through Section 301 investigations and tariffs,” GTRI said in a note. “India should be prepared for additional Section 301 tariffs in areas such as excess capacity.”

GTRI added that India should treat the BTA negotiations and the Section 301 investigations as separate matters, noting that the rationale for the BTA has disappeared following the U.S. Supreme Court’s February 20 ruling striking down the reciprocal tariff framework.

“The proposed BTA now appears increasingly one-sided, with India being asked to make significant concessions while receiving no benefits in return,” GTRI added. “India should reassess its participation and consider stepping away from the BTA, as Malaysia has done,” the trade body said.

Mr. Sen further explained that the U.S. administration has been under increasing pressure to find an alternative to the 10% temporary tariff it had introduced under Section 122 of the Trade Act on balance-of-payments grounds after the Supreme Court had struck down the reciprocal tariffs.

“That justification has been viewed as legally fragile by the U.S. Court of International Trade and potentially inconsistent with WTO norms,” Mr. Sen said. “In this context, the ‘forced labour’ approach provides a comparatively stronger legal basis to sustain, or even raise, equivalent tariff levels,” he added.

Published – June 03, 2026 09:45 am IST