Two days after Commerce minister Piyush Goyal said that the India-US trade deal was now down to finalising the ‘commas and full stops’, the Donald Trump administration has proposed to impose additional tariffs on countries under its Section 301 probe. India is one of the many countries that has been named.The Section 301 probe launched by the US in March 2026 is a known variable in India’s trade deal talks with America. Yet, the proposal to impose duties on around 60 countries assumes significance at a time when a delegation from the US is in India to finalise terms of the India-US trade deal.Also Read | More Trump tariffs? Amid trade deal talks, US names India in its Section 301 findings; proposes additional dutiesReacting to the new tariff proposal, the Commerce ministry said, “India remains engaged with the US 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 2 February 2026 and in accordance with the joint statement released on 7 February 2026.”India and the US announced a trade agreement in February this year, under which the 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 Donald Trump administration are illegal. Soon after, Trump announced a 10% universal tariff, which is set to expire next month. The US move on Section 301 should be viewed with that lens, experts say.
What is Section 301 & what has USTR said?
Section 301 under the US Trade Act of 1974 allows the Office of the United States Trade Representative (USTR) to launch probes, examine closely the trade practices and policies of foreign governments. The main aim is to check whether any unfair practices are in place that harm US trade interests.
If the investigation determines that unfair trade practices are in place, then the US government can take measures such as trade restrictions and tariffs to counter the impact.In this context, the USTR launched two separate investigations in March this year. These covered around 60 economies with the major concerns related to forced labour and excess industrial capacity.The USTR on June 2 issued its findings in the forced labour investigation, with additional tariffs proposed on sixty countries.The tariffs remain at a proposal stage. The interested countries who want to contest the findings can submit requests to appear at hearings and summaries of testimony by June 22, 2026. Additionally, written comments can be filed by July 6. The hearings will take place on July 7.The final decision is likely to come by July itself in time for the expiry date of the Section 122 tariffs of 10% that are currently in place. Experts caution that the tariffs could be effective immediately after the hearings.Also Read | US again throws India over the Russian oil barrel
What does new tariff proposal mean for India?
Two sets of tariffs have been proposed by the US – 10% and 12.5%. The 10% duties apply to countries that either impose a forced labor import prohibition, have committed to impose and enforce such a prohibition through an Agreement on Reciprocal Trade, or have imposed a partial regime with the effect of preventing the importation of certain forced labor goods. Countries like Pakistan fall in this category.
The 12.5% applies to other economies – i.e., those with no such prohibition or commitment whatsoever. These include major economies like China, Switzerland, Singapore, UAE, India.For India, which falls in the group of 54 economies found to have failed to impose and effectively enforce a prohibition, the applicable proposed rate would be 12.5% — unless India can credibly demonstrate even a partial forced labour import prohibition regime before the process concludes, which would bring it down to 10%. Lower tariffs have been proposed for textiles, although specific rates have not yet been finalised.Now, Indian exports to the US may face higher scrutiny and the additional tariffs will hit as well, say experts. Manoj Mishra, Partner and Tax Controversy Management Leader, Grant Thornton Bharat tells TOI, that if the additional 12.5% tariff is implemented, it could adversely impact India’s exports to the US, particularly in sectors such as aluminium, cotton, seafood, coffee and rice, by increasing landed costs and affecting global competitiveness. The expert notes that India has traditionally faced scrutiny on market access and tariff issues; however this investigation expands the debate into supply chain due diligence and forced labour compliance.
“Going forward, Indian exporters may face heightened scrutiny from US importers and regulators on issues relating to traceability, sourcing practices and supply chain transparency,” Mishra says.Yet another point of view is that for the US, Section 301 may be the final way to impose tariffs on trading partners, especially as the US Supreme Court has struck down Trump’s reciprocal tariffs as illegal.Agneshwar Sen, Trade Policy Leader, EY India says: “The USTR’s Section 301 ‘forced labour’ findings against India, along with almost all of their trading partners, must be read in its proper strategic context.” The Trump administration has been under pressure to replace the legally vulnerable 10% tariff it imposed on balance-of-payments grounds (under Section 122 of the US Trade Act)— a basis regarded as unsustainable by the US Court of International Trade and arguably under WTO disciplines. This ‘forced labour’ framework offers a relatively more defensible legal foundation for maintaining equivalent or higher duties, says Sen.For India, the implications are layered. In the immediate term, Indian exporters in labour-intensive sectors — textiles, apparel, carpets, leather goods, and brassware — face the prospect of a fresh Section 301 surcharge compounding existing tariff burdens.
What should India do?
Engaging in replies and challenging the findings is one way forward, say trade experts.According to EY India’s Sen, India must file substantive written comments by July 6 and engage actively at the July 7 public hearing to contest the findings. It may be noted that the Section 122 tariffs expire on July 24, 2026.Global Trade Research Initiative (GTRI) advocates challenging the US investigations legally.“The 12.5% tariffs exceed the 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,” says GTRI founder Ajay Srivastava.
The think tank points out that the investigation by the Trump administration is not based on any allegations that Indian exports are produced using forced labour. Instead, the action focuses on whether countries prohibit imports made with forced labour in third countries.Hence, the think tank is of the view that India should argue that the US is in effect attempting to impose its own preferred import-control framework on other countries through unilateral trade measures. This, it says, 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 US 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,” GTRI says.
Future of India-US Trade Deal Talks
Trade experts also believe that the US move is part of a broader pressure tactic, and India is already taking up the Section 301 probe in its ongoing trade deal talks with India.Incidentally, even before the Section 301 findings were published, reports suggested that the probe would feature in the India-US trade deal talks taking place this week. Importantly, an India-US trade deal can only be finalized once clarity emerges on the 10% tariffs regime that is currently underway after the apex court order in America.In this context, the timing of the Section 301 probe matters. India on its part is looking to retain competitive tariff advantage. Reports suggest that India has in the past questioned the Section 301 investigations – one related to structural overcapacity in sectors such as solar modules, processed food, steel and aluminium. The other is about failure to act against forced labour by several countries.For Agneshwar Sen, the more consequential response from India must come at the negotiating table. “The bilateral trade deal currently under negotiation offers India its most effective instrument to seek exemption from, or a phased rollback of, these proposed duties. Securing a no ‘forced labour’ import prohibition commitment , even a framework within the trade agreement would be well worth it,” Sen tells TOI.GTRI says that the 12.5% tariffs are a part of a broader effort by the US to increase pressure on India.India should be prepared for additional Section 301 tariffs in areas such as excess capacity. New Delhi should treat the trade 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,” GTRI concludes.
