India could face fresh trade challenges in the U.S. market after Washington proposed additional Section 301 tariffs of up to 12.5% on imports from 54 economies, including India, citing concerns related to forced labour-linked trade practices. The move is not based on allegations that Indian exports involve forced labour, but on whether India restricts imports connected to forced labour in third countries. With public consultations underway and final tariffs expected in the coming weeks, trade experts have urged India to challenge the legal basis of the investigation. The proposal is also being viewed as a pressure tactic amid ongoing India-U.S. Bilateral Trade Agreement (BTA) negotiations. India has said that remains engaged with the U.S. on the matter as a part of Section 301 proceedings.
What the USTR has proposed
The Office of the United States Trade Representative (USTR) launched two separate Section 301 investigations on March 11 and 12, 2026, covering 60 economies over concerns related to forced labour and excess industrial capacity.
USTR has issued its findings in the forced labour investigation and proposed additional tariffs on imports from 54 economies. The proposal includes a 10% tariff on imports from Canada, Ecuador, the European Union, Indonesia, Mexico, and Pakistan, and a 12.5% tariff on imports from 48 other economies, including India and China. Lower tariffs have been proposed for textiles, although specific rates have not yet been finalised.
The measure remains a proposal and has not yet been finalized. The proposal has now entered the consultation phase. Interested parties can submit requests to appear at hearings and summaries of testimony by June 22, 2026, while written comments are due by July 6. USTR is scheduled to hold hearings on July 7. A final decision is expected in late June or July, potentially before the expiry of the temporary Section 122 tariffs @10% on July 24, 2026. Once finalized, the tariffs could take effect almost immediately.
India must Challenge Scope of Investigation
The 12.5% tariffs exceed USA’s WTO commitment as they exceed bound duties. Hence they are WTO illegal. The current investigation exceeds the scope of Section 301 which deals with market-access barriers faced by the US firms in the country being investigated and not what it imports and from where.
The investigation is not based on allegations that Indian exports are produced using forced labour. Rather, the USTR action focuses on whether countries prohibit imports made with forced labour in third countries. India must argue that the United States is attempting to impose its preferred import-control framework on other countries through unilateral trade measures, this is outside the scope of section 301.
India may also argue that concerns regarding forced labour, particularly in countries such as China, are often product-specific and that the United States itself remains a major importer of many of the products at issue. Hence, broad country-wide tariff actions are an inappropriate response when the problem could be limited to few products.
Pressure on India to sign BTA
Think tank Global Trade Research Initiative views the 12.5% tariffs as part of a broader effort by Washington to increase pressure on India through Section 301 investigations and tariffs. India should be prepared for additional Section 301 tariffs in areas such as excess capacity. New Delhi should treat the Bilateral Trade Agreement (BTA) negotiations and the Section 301 investigations as separate matters. For doing this India must be prepared to fight and pay section 301 tariffs like other countries.
The rationale for the BTA has disappeared after the U.S. Supreme Court's February 20 ruling that struck down the reciprocal tariff framework. The proposed BTA now appears increasingly one-sided, with India being asked to make significant concessions while receiving no benefits in return. India should reassess its participation and consider stepping away from the BTA, as Malaysia has done.
Ministry of Commerce reacts
Meanwhile, The Ministry of Commerce in a statement said, “India remains engaged with the U.S. on the matter as a part of Section 301 proceedings. India is also parallelly engaged with the US for finalisation of a framework agreement as was announced on 2nd February 2026 and in accordance with the joint statement released on 7th February 2026.”
It says that as per the report, the proposed tariffs are not yet final and stakeholders can submit requests to participate in public hearings by 22 June 2026. Written comments can be submitted until 6 July 2026. Public hearings will be held on 7 July 2026. The USTR will consider the comments and testimony received before taking a final decision on the proposed measures.