The United States has proposed new tariffs on imports from India as part of a broader trade investigation into the use of forced labour in global supply chains, adding a fresh layer of complexity to ongoing negotiations between the two countries over a bilateral trade agreement.
In findings released on June 3, the Office of the United States Trade Representative (USTR) said India was among 54 economies that have allegedly failed to impose and effectively enforce restrictions on the import of goods produced using forced labour.
As a result, the USTR has proposed a 12.5 per cent additional tariff on imports from these countries.
The announcement comes at a crucial moment, with senior US and Indian negotiators currently engaged in a three-day round of talks in New Delhi aimed at finalising the framework of a bilateral trade pact.
India Rejects Allegations
India has strongly disputed the USTR's findings and urged Washington to withdraw the investigation. New Delhi maintains that concerns related to labour standards should be addressed through ongoing trade discussions rather than through unilateral tariff measures.
Officials familiar with the negotiations said India remains focused on securing relief from Section 301 investigations and obtaining tariff terms that are competitive with those offered to other trading partners.
According to sources, USTR chief Jamieson Greer could visit India once the broad contours of the proposed agreement are finalised.
What the USTR Proposed
Under the proposal, countries that already enforce a ban on forced-labour imports, have committed to implementing one through reciprocal trade agreements, or maintain partial restrictions on such imports, would face an additional 10 per cent tariff.
For all other economies, including India, the proposed additional duty is 12.5 per cent.
The USTR has also suggested a special textile mechanism that would allow a limited volume of apparel and textile imports from certain countries to enter the US market at reduced tariff rates.
However, the proposed measures are not yet final. The USTR has opened a public consultation process before any duties can be implemented.
Written submissions will be accepted until July 6, while public hearings are scheduled to begin on July 7.
Understanding Section 301
The proposed action stems from Section 301 of the US Trade Act. This powerful trade enforcement mechanism allows Washington to investigate foreign trade practices it considers unfair, discriminatory or harmful to US commerce.
If an investigation determines that a country's policies negatively affect American businesses or workers, the US government can impose retaliatory tariffs or other trade restrictions.
The latest proposal is part of President Donald Trump's broader effort to revive country-specific tariffs that were a key component of his earlier trade agenda.
US Justifies Action
Defending the move, USTR Jamieson Greer said the failure of major trading partners to address goods produced with forced labour creates an uneven competitive environment for American workers.
"The failure of our most important trading partners to address the importation of goods made with forced labor is unacceptable. This creates a dynamic where American workers are forced to compete globally on an uneven playing field," Greer said.
He added that the objective was to complete the investigations and establish a framework that would allow the administration to act swiftly once existing trade measures expire.
Trade Talks Continue
Despite the latest tariff proposal, discussions between India and the United States remain active.
India's Commerce Ministry said it continues to engage with Washington under the Section 301 consultation process while simultaneously working toward a broader trade framework announced by both countries earlier this year.
For now, the proposed tariffs remain under review. Still, the development highlights the delicate balance both nations must strike as they seek to deepen economic ties while navigating disagreements over trade and labour policies.
