USTR proposes up to 12.5% tariffs over forced labour import rules
India-US trade agreement talks continue despite parallel Section 301 probe
India may challenge proposed tariffs as bilateral trade negotiations near completion
The timing could not have been more deliberate. Even as a US trade delegation led by Assistant United States Trade Representative (USTR) Brendan Lynch was sitting inside offices in New Delhi — working through what both sides had called the final stretch of a bilateral trade agreement — Washington released a report proposing fresh tariffs on India. The stated reason was forced labour.
The Office of the USTR launched Section 301 investigations on March 12 into the acts, policies, and practices of 60 economies related to the failure to impose and effectively enforce a prohibition on the importation of goods produced with forced labour.
The findings are now in. India is among 54 economies that have failed to impose and effectively enforce a prohibition on imports made with forced labour. Economies that have already adopted, or committed to adopt, forced labour import prohibitions could face an additional tariff of 10%, while all others could be subject to a 12.5% duty.
"The failure of our most important trading partners to address the importation of goods made with forced labour is unacceptable. This creates a dynamic where American workers are forced to compete globally on an unlevel playing field," USTR chief Jamieson Greer said.
The good news is that the proposal is not final yet. Interested parties can submit requests to appear at hearings by 22 June 2026, with written comments due by July 6, and USTR hearings scheduled for July 7. A final decision is expected in late June or July, potentially before the temporary Section 122 tariffs at 10% expire on July 24. Once finalised, the tariffs could take effect almost immediately.
A Legal Question
Trade analysts have pointed to an important distinction buried in the investigation's framing. This action is not about Indian exports being made with forced labour. The Global Trade Research Initiative (GTRI) noted that the USTR action focuses not on how Indian goods are produced, but on whether India restricts imports from third countries where forced labour conditions exist, primarily China.
Section 301 of the US Trade Act of 1974 was designed to address market-access barriers faced by American firms in the country under investigation. GTRI argues the current investigation exceeds that traditional scope, with Washington effectively seeking to impose its own import-control framework on other nations through unilateral trade measures.
The report also notes that concerns about forced labour in third countries are often product-specific, and that the United States itself remains a major importer of many of the products at issue, making broad country-wide tariff action a disproportionate response.
The Commerce & Industry Ministry confirmed that India still remains engaged with the US on the matter as part of the Section 301 proceedings.
India-US BTA in Progress
All of this is happening alongside active bilateral trade agreement (BTA) negotiations. A US delegation is visiting New Delhi from 1 to 4 June to continue discussions on finalising the interim BTA, with both sides indicating the deal is almost finalised with only the last leg of negotiations remaining.
Commerce Ministry, in its statement, confirmed in its statement that New Delhi is "parallelly engaged with the US 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."
The broader context matters here too. On February 20, the US Supreme Court ruled 6-3 that the International Emergency Economic Powers Act does not authorise the president to impose tariffs, striking down Trump's sweeping IEEPA-based tariffs including the Liberation Day reciprocal tariffs.
The Council on Foreign Relations noted shortly after the verdict that the ruling removed the most flexible pathway for deploying reciprocal tariffs, but that IEEPA is only one tool in a much larger trade arsenal, with non-IEEPA tariffs including steel and aluminium remaining in place. Section 301 sits firmly within that remaining arsenal.
GTRI founder Ajay Srivastava argues that India should treat the Section 301 investigations and the BTA negotiations as entirely separate tracks and be prepared to contest the tariffs through the consultation process on their own merits. He also argues that the rationale for a bilateral deal has shifted significantly after the Supreme Court ruling, with the proposed agreement now appearing more one-sided than it did when negotiations began. That is a contested view since Indian and US negotiators have publicly suggested the deal remains broadly in both parties' interest.
