Fresh trade hurdle? India among economies facing additional US tariffs

India could face a fresh trade challenge even as it continues to advance negotiations with Washington on a long-pending bilateral trade agreement, after the Trump administration proposed additional tariffs of up to 12.5 per cent on imports from 60 economies over alleged failures to curb goods linked to forced labour.

The Office of the United States Trade Representative (USTR) on Wednesday announced the proposed duties under Section 301 of the Trade Act of 1974, signalling a renewed escalation in US trade enforcement actions following earlier legal setbacks to President Donald Trump’s tariff strategy.

The move comes at a sensitive juncture for India-US trade relations, with both sides currently engaged in discussions to finalise a framework agreement aimed at strengthening economic ties and resolving outstanding tariff-related issues.

More from Business

India among countries facing higher tariff exposure

According to the USTR findings, India is among 54 economies that have been assessed as failing to both impose and effectively enforce prohibitions on imports linked to forced labour. These countries could face additional tariffs of 12.5 per cent on exports to the United States.

Another six economies — Canada, Ecuador, the European Union, Indonesia, Mexico and Pakistan — were found to have legal prohibitions in place but inadequate enforcement mechanisms, and would face a lower additional tariff rate of 10 per cent.

US Trade Representative Jamieson Greer said the findings reflect concerns over global supply chains and their impact on American workers.

“The failure of our most important trading partners to address the importation of goods made with forced labor is unacceptable,” Greer said.

“This creates a dynamic where American workers are forced to compete globally on an unlevel playing field,” he added.

India says engaged on Section 301

Responding to the development, India said it remains engaged with the United States on the Section 301 proceedings as well as on the ongoing negotiations for a broader trade framework agreement.

Officials indicated that discussions are continuing on both tariff-related issues and broader market access terms as part of efforts to conclude a mutually acceptable trade arrangement.

A US delegation led by Assistant US Trade Representative for South and Central Asia Brendan Lynch is currently in New Delhi for a fresh round of talks, underscoring the parallel tracks of negotiation and trade enforcement.

Negotiations continue amid tariff uncertainty

The proposed tariffs come after the US Supreme Court earlier this year struck down a series of emergency tariffs imposed under the International Emergency Economic Powers Act, prompting the Trump administration to increasingly rely on Section 301 investigations as an alternative legal mechanism for trade action.

India and the United States had reached an initial understanding on a trade deal in February, but progress slowed following legal and policy shifts in Washington.

Indian officials are seeking tariff predictability and competitive access for exporters, particularly as India positions itself as a key manufacturing alternative in global supply chains. New Delhi is also pushing for improved parity with competing Asian exporters, including Bangladesh, Pakistan and Sri Lanka.

Broader US trade enforcement push

The forced labour-related tariff proposal is part of a wider escalation in US trade enforcement actions. Earlier this week, the USTR proposed a 25 per cent tariff on several Brazilian goods following a separate Section 301 investigation into digital trade practices.

Washington is also expected to announce findings from another major probe into industrial overcapacity across multiple economies, including China, signalling a broader use of trade tools beyond traditional tariff disputes.

Trade analysts say the administration is increasingly linking labour standards, supply chain compliance and industrial policy concerns to trade access, reshaping the global trade architecture.

Exemptions and next steps

The USTR proposal includes exemptions for several categories of goods, including energy products, pharmaceuticals, aircraft parts, rare earth materials, organic chemicals, beef, coffee, and selected agricultural products.

A separate mechanism has also been proposed for textiles and apparel, which could allow limited volumes to enter the US market at reduced tariff rates, although details remain unclear.

The measures are currently open for public consultation, with comments accepted until July 6 and a public hearing scheduled for July 7 before any final decision is taken.

With inputs from agencies.