The US Trade Representative has proposed 12.5 percent additional duties on India and 53 other countries for failing to prohibit goods produced with forced labor, a move that complicates ongoing bilateral trade agreement negotiations between India and the US. This action stems from a Section 301 investigation, a US law allowing tariffs on trade practices deemed harmful to American commerce, and India finds itself in two such probes, including one related to excess industrial capacity. India has denied the forced labor allegations.

The US Trade Representative has proposed 12.5 percent additional duties on India and 53 other countries for failing to prohibit goods produced with forced labor, a move that complicates ongoing bilateral trade agreement negotiations between India and the US. This action stems from a Section 301 investigation, a US law allowing tariffs on trade practices deemed harmful to American commerce, and India finds itself in two such probes, including one related to excess industrial capacity. India has denied the forced labor allegations.

The US Trade Representative has proposed 12.5 percent additional duties on India and 53 other countries for failing to prohibit goods produced with forced labor, a move that complicates ongoing bilateral trade agreement negotiations between India and the US. This action stems from a Section 301 investigation, a US law allowing tariffs on trade practices deemed harmful to American commerce, and India finds itself in two such probes, including one related to excess industrial capacity. India has denied the forced labor allegations.

The US Trade Representative (USTR) on Tuesday proposed 12.5 per cent additional duties on India and 53 other countries for what Washington calls a failure to prohibit the import of goods produced with forced labour. The timing of this is also crucial, as Indian trade delegations are across the table from US officials in New Delhi, trying to finalise the terms of a bilateral trade agreement.

The USTR move is part of a Section 301 investigation. This US law allows the US President to impose tariffs on countries whose trade practices are deemed unreasonable and harmful to American commerce.

The USTR has now launched a series of such investigations against multiple traded partners, covering forced labour, digital trade practices, and excess industrial capacity.

US law and its impact

India is caught in at least two of these probes: the forced-labour inquiry that produced Tuesday's proposal, and a separate capacity-related Section 301 investigation against 16 countries, including China, Japan, and the EU, whose findings are expected shortly.

The proposed 12.5 per cent rate is the higher of the two tiers. Countries that have at least partially committed to prohibiting forced-labour goods, including the EU, UK, Canada, and Mexico, face a lower 10 per cent rate. India, along with China, Japan, Brazil, and Saudi Arabia, falls into the higher bracket.

"USTR found that India has failed to impose and effectively enforce a forced labor import prohibition," read the report regarding the investigation. It further went on to state: "...we found that the failure to impose and effectively enforce a forced labor import prohibition is unreasonable..." and "...we found that the failure to impose and effectively enforce a forced labor import prohibition burdens or restricts US commerce."

However, this is US law and a US investigation. India has categorically denied the forced-labour allegations as per multiple ground reports, and the Centre's delegation looks to iron it out in the ongoing trade negotiations.

Back to the probe, the USTR has exempted certain products, including energy, rare earths, pharmaceuticals, coffee, and aircraft parts, from the proposed duties. Public hearings are scheduled for July 7.

The Centre has called on the US to address the matter through bilateral trade negotiations rather than unilateral measures. The two countries have been negotiating an interim trade pact, and New Delhi's position is that signing a deal should provide a shield against such unilateral tariff actions.

Talks of steel

Simultaneously, Commerce Minister Piyush Goyal held talks with UK officials in New Delhi this week over Britain's new steel safeguard measures, set to take effect from July 1, 2026, which would slash tariff-free steel import quotas by 60 per cent, hitting India's steel and iron product exports to the UK, worth $893.4 million in FY26.

The India–UK Comprehensive Economic and Trade Agreement, signed in July 2025, allows 99 per cent of Indian exports to enter the UK duty-free, but the steel dispute has delayed its operationalisation. New Delhi has warned it could scale back tariff concessions on British goods, including Scotch whisky, whose duty India agreed to halve under the pact, if the steel issue is not resolved.

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