Two days after Commerce Minister Piyush Goyal stated that the India-US trade deal was down to finalising the 'commas and full stops', the Donald Trump administration has proposed additional tariffs on countries under its Section 301 probe. India is among the many nations named in this investigation.
Section 301 Probe and Its Implications
The Section 301 probe, launched by the US in March 2026, is a known factor in India's trade deal negotiations with America. However, the proposal to impose duties on around 60 countries assumes significance as a US delegation is in India to finalise the terms of the trade agreement.
India's Response
Reacting to the new tariff proposal, the Commerce ministry stated, 'India remains engaged with the US on the matter as part of Section 301 proceedings. India is also parallelly engaged with the US for finalisation of a framework agreement as announced on 2 February 2026 and in accordance with the joint statement released on 7 February 2026.'
Background of India-US Trade Relations
India and the US announced a trade agreement in February this year, under which tariffs on Indian exports were reduced to 18% from 50%. However, before the framework could be finalised, the US Supreme Court ruled that the reciprocal tariffs by the Trump administration were illegal. Subsequently, Trump announced a 10% universal tariff, set to expire next month. Experts say the US move on Section 301 should be viewed in this context.
What is Section 301?
Section 301 of the US Trade Act of 1974 allows the Office of the United States Trade Representative (USTR) to investigate trade practices of foreign governments to determine if they harm US trade interests. If unfair practices are found, the US can impose trade restrictions and tariffs.
USTR Investigations
The USTR launched two investigations in March 2026, covering around 60 economies, focusing on forced labour and excess industrial capacity. On June 2, the USTR issued findings on forced labour, proposing additional tariffs on 60 countries. These tariffs are at a proposal stage, with interested countries able to request hearings by June 22, submit written comments by July 6, and attend hearings on July 7. A final decision is expected by July, coinciding with the expiry of the 10% Section 122 tariffs.
Impact on India
The US has proposed two tariff rates: 10% and 12.5%. The 10% rate applies to countries with forced labour import prohibitions or commitments. India falls into the 12.5% category, along with China, Switzerland, Singapore, and the UAE, as it lacks such a prohibition. India could potentially reduce the rate to 10% by demonstrating a partial forced labour import prohibition regime. Lower tariffs are proposed for textiles, though specific rates are pending.
Experts warn that additional tariffs could hit Indian exports, especially in sectors like aluminium, cotton, seafood, coffee, and rice. Manoj Mishra of Grant Thornton Bharat notes that the 12.5% tariff would increase landed costs and affect competitiveness. He adds that Indian exporters may face heightened scrutiny on supply chain due diligence and forced labour compliance.
Agneshwar Sen of EY India views the Section 301 probe as a strategic move by the US to replace the legally vulnerable 10% tariff. He says the forced labour framework offers a more defensible legal basis for maintaining duties. For India, labour-intensive sectors like textiles, apparel, carpets, leather goods, and brassware face additional tariff burdens.
What Should India Do?
Trade experts suggest India engage in replies and challenge the findings. Sen advises filing substantive written comments by July 6 and actively participating in the July 7 hearing. The Global Trade Research Initiative (GTRI) advocates legal challenges, arguing that the 12.5% tariffs exceed WTO bound duties and that the investigation exceeds Section 301's scope. GTRI founder Ajay Srivastava states, 'The investigation is not based on allegations that Indian exports use forced labour, but on whether countries prohibit imports made with forced labour in third countries.'
GTRI recommends India argue that the US is imposing its own import-control framework through unilateral measures, outside Section 301's scope. India could also note that forced labour concerns are product-specific and that the US itself imports many of these products.
Future of India-US Trade Deal Talks
Trade experts believe the US move is a pressure tactic, and India is addressing the Section 301 probe in ongoing trade talks. An India-US trade deal can only be finalised once clarity emerges on the 10% tariffs regime. The timing of the Section 301 probe is crucial. India aims to retain competitive tariff advantages and has previously questioned investigations on structural overcapacity and forced labour.
Sen emphasises that the most consequential response must come at the negotiating table. 'The bilateral trade deal offers India its most effective instrument to seek exemption or phased rollback of these duties. Securing a forced labour import prohibition commitment within the trade agreement would be worthwhile.' GTRI warns that India should be prepared for additional Section 301 tariffs on excess capacity and treat trade negotiations and investigations separately.
