Why Is The US Imposing A Forced-Labour Tariff On India? What It Means

The United States has imposed a 10% tariff on imports from India as part of a wider trade action targeting 60 economies over concerns that they have not done enough to prevent goods produced with forced labour from entering global supply chains.

The move, announced by the Office of the US Trade Representative (USTR) under Section 301 of the Trade Act of 1974, replaces the temporary 10% worldwide tariff that expired on July 24. While India avoided the higher 12.5% tariff imposed on several countries, the new measure could still affect exports and ongoing India-US trade negotiations.

What is a forced-labour tariff?

A forced-labour tariff is an additional import duty imposed on goods from countries that the US believes have failed to prohibit or effectively enforce restrictions on products made using forced labour.

The US says it has banned imports made with forced labour for nearly a century and argues that countries allowing such goods into supply chains create an unfair trade advantage while enabling human rights abuses.

Under the International Labour Organization's Forced Labour Convention, forced labour is defined as work or service extracted under the threat of a penalty and without voluntary consent.

Why has the US targeted India?

India is among 17 countries facing a 10% tariff, rather than the higher 12.5% rate imposed on many others.

Initially, India was expected to fall into the higher tariff bracket. However, Washington acknowledged New Delhi's recent policy changes. On June 14, India amended its Foreign Trade Policy to prohibit imports of goods produced using forced labour.

According to the USTR, countries that have introduced such prohibitions, committed to enforcing them, or established partial restrictions qualified for the lower 10% tariff.

The Trump administration nevertheless maintains that India, along with several other economies, still needs to strengthen enforcement of these restrictions.

What does Section 301 of US trade law allow?

Section 301 of the Trade Act of 1974 allows the US President to impose tariffs or other trade sanctions against countries found to engage in "unjustifiable", "unreasonable" or "discriminatory" trade practices that burden American commerce.

Unlike the temporary global tariff imposed earlier this year, the Section 301 tariff has no automatic expiry date. It can remain in place until the USTR decides to modify or remove it.

The Trump administration has previously relied on Section 301 to impose tariffs on China during Trump's first term.

Which Indian sectors could be affected?

The United States is India's largest export market, making the tariff significant for several labour-intensive industries.

Sectors that could feel the impact include:

• Textiles and apparel

• Leather goods and footwear

• Gems and jewellery

• Engineering goods and auto components

• Furniture, handicrafts and some agricultural products

The tariff raises costs for US importers, which could reduce the price competitiveness of Indian products. However, India may still fare better than countries facing the higher 12.5% tariff.

Several products remain exempt, including oil, natural gas, fertilisers, goods already covered under separate US tariffs, and products where higher duties could disrupt US supply chains.

Why did India change its import rules on forced-labour goods?

India amended its Foreign Trade Policy in June to prohibit imports produced using forced labour after the US began its Section 301 investigation.

The policy change appears to have helped India move from the proposed 12.5% tariff category to the lower 10% bracket.

However, the US has indicated that introducing a prohibition alone is not enough and expects effective enforcement of the new rules.

What does this mean for the India-US trade deal?

The new tariff comes even as India and the US continue negotiating a broader bilateral trade agreement.

India has challenged the Section 301 investigations and maintains that such issues should be resolved through the trade negotiations rather than unilateral tariffs.

Although India avoided the higher tariff rate, the latest move signals that labour standards and supply-chain compliance are becoming increasingly important in US trade policy. It also means Indian exporters now face a more durable tariff, replacing a temporary measure that was due to expire, adding another layer of uncertainty as both countries work towards a trade deal.