India avoids a steeper US tariff, with exports facing a 10% Section 301 duty from Friday after New Delhi tightened rules against forced-labour imports.
India will pay a 10% tariff on most of its exports to the US from Friday after the Trump administration rolled out the levy under a new legal provision as the successor to the temporary duty of the same rate that expired on July 24.
The 10% rate is lower than the 12.5% India would have faced under the office of the US Trade Representative’s (USTR) June draft, and averts a comparative disadvantage against China, Vietnam and around 36 other economies that were placed in the higher bracket. The tariff, imposed under Section 301 of the US Trade Act of 1974, is paid on top of the applicable Most-Favoured-Nation (MFN) duty, and follows the conclusion of one of two Section 301 investigations against India.
Alongside India, USTR placed 16 other economies in the 10% bracket — among them Pakistan, Sri Lanka and, notably, Bangladesh, a direct competitor in textiles and garments, one of India’s largest export categories to the US. The lower rate applies to economies that have adopted a forced-labour import prohibition, committed to one through an Agreement on Reciprocal Trade, or implemented a partial regime with the same effect.
That said, the new duties under Section 301 are both temporary and partial, people aware of the matter said — temporary because the architecture is expected to be superseded once the interim BTA (bilateral trade agreement) is signed, and partial because only one of the two Section 301 investigations has concluded.
India’s placement in the lower bracket followed a July 13 amendment to the Foreign Trade Policy banning the import of goods produced wholly or partly through forced or compulsory labour — a measure USTR had, in its June 2 draft report, found India to be without.
“Today’s action will begin to correct what is both a human rights abuse and distortive trade practice to improve the welfare of workers everywhere,” US Trade Representative Jamieson Greer said in a statement announcing the tariff. “I am encouraged by the trading partners who have moved quickly to adopt forced labour import prohibitions, and look forward to ensuring their effective enforcement.”
The 60 economies covered by the action together account for over 99% of US imports. Alongside India, the White House named Argentina, Cambodia, Canada, Ecuador, El Salvador, Guatemala, Honduras, Indonesia, Jordan, Malaysia, Mexico, Trinidad and Tobago and the United Kingdom among those in the 10% bracket. Specific tariff arrangements have been put in place for the European Union, Taiwan, Japan, South Korea and Switzerland. USTR has accused China and Vietnam, both in the 12.5% bracket, of flouting the Uyghur Forced Labor Prevention Act.
USTR’s June 2 draft report had found that India “failed to impose and effectively enforce a forced labour import prohibition”, that the failure was unreasonable, and that it burdened or restricted US commerce — placing India in the 12.5% bracket at that stage. Representations by New Delhi in April, May and early July, followed by the July 13 ban, moved India into the lower group by the July 24 determination, people aware of the matter said. USTR said it had received over 1,600 written comments on the proposed action and held public hearings between July 7 and July 9 at which more than 100 witnesses testified.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), described the outcome as a significant achievement given the United States is India’s largest export destination. “India secured the lower 10% tariff, down from the 12.5% rate proposed in the USTR’s draft, after introducing measures to prohibit imports made with forced labour,” he said. “The USTR considered this a policy improvement, placing India in the lower-tariff category alongside 16 other economies.”
The excess-capacity investigation, launched in the same month as the forced-labour one, covers 16 economies including India. Its outcome carries the potential to erode India’s position against key export rivals — among them China, Vietnam, Indonesia, Malaysia, Sri Lanka and Bangladesh — persons aware of the matter said. Of India’s neighbouring competitors, Pakistan, Sri Lanka and Bangladesh are not subject to the excess-capacity investigation. If it produces duties on India but not on them, the parity established by Thursday’s action would invert.
Section 301, unlike Section 122, carries no rate ceiling and no fixed expiry, though it requires a formal investigation before duties can be imposed.
The moves come against the backdrop of talks between New Delhi and Washington on the interim India-US bilateral trade agreement , which is still unfinalised.
