Trump Administration Seeks Section 301 Loophole to Restore Tariffs

The Trump administration has warned that tariff rates on Indian imports could revert to their previous levels if ongoing Section 301 investigations prove successful, as it seeks an alternative legal pathway after the US Supreme Court struck down reciprocal tariffs imposed under the International Emergency Economic Powers Act (IEEPA).

According to TOI report, US Treasury Secretary Scott Bessent said the administration was exploring new avenues to impose tariffs on trading partners after the Supreme Court's February ruling invalidated IEEPA-based tariffs. "Right now, we have something called Section 122 tariffs, which is a 10% global tariff. Currently, USTR Ambassador Jamieson Greer, is doing studies for Section 301. And if those studies are successful... then the tariff rates are going to go back to exactly where they were," Bessent said.

The US Supreme Court held by a 6-3 majority on February 20 that IEEPA does not authorise the president to impose tariffs, effectively invalidating the reciprocal tariff framework that had been the foundation of trade negotiations with multiple countries. The ruling left tariffs imposed under Section 301 of the Trade Act of 1974 unaffected.

India and the United States had announced a trade pact in February under which tariffs on Indian exports were to be reduced from 50% to 18%. Before the agreement could be formally finalised, the Supreme Court ruling rendered the reciprocal tariff structure unlawful. President Trump subsequently imposed a universal 10% tariff under Section 122, which is scheduled to lapse on July 24.

US Trade Representative Jamieson Greer was in India this week for two days of talks with Commerce Minister Piyush Goyal to finalise the first phase of the bilateral trade agreement. While both sides have indicated they are "very close" to finalising a deal, India has held firm on securing a competitive advantage compared to other countries.

In its interim findings, the USTR has proposed an additional 12.5% tariff on imports from India and more than 50 other countries, citing their alleged failure to curb imports linked to forced labour. India is among 54 economies identified by the USTR as having failed to establish and effectively enforce a prohibition on forced labour imports.

The findings of a separate Section 301 investigation into structural excess capacity involving 15 countries, including India, are still awaited. The proposed duties have not been finalised. Countries wishing to challenge the findings can submit requests to participate in hearings by June 22, with written submissions accepted until July 6 and hearings scheduled to begin on July 7. A final determination is expected in July, around the time the existing 10% Section 122 tariffs are due to expire.

Bessent indicated that President Trump had used reciprocal tariffs last year as a tool to bring trading partners to the negotiating table, and that the Section 301 process was intended to serve a similar purpose.