The 10 per cent across‑the‑board tariff that the US imposed under Section 122 in February reaches its statutory 150‑day limit on July 24, 2026, and therefore lapses automatically. Rather than allowing most tariffs to revert to normal, Washington has now shifted the surcharge onto Section 301, using a forced‑labour investigation to justify new duties on imports from 60 economies, including India.
Section 122 is a rarely used balance‑of‑payments tool that caps emergency tariffs at 15 per cent and 150 days, unless Congress agrees to an extension.
Section 301, by contrast, allows the US Trade Representative (USTR) to impose tariffs or other restrictions whenever foreign government practices are found “unreasonable” and burdensome for US commerce. These duties can, in practice, remain until actively modified or withdrawn.
In its July 23 notice, the USTR concluded that failures to ban imports of goods made with forced labour constituted such an unreasonable practice and announced tariffs on all imports from the investigated economies.
India was placed in a group of 17 economies facing a 10 per cent Section 301 duty because it has adopted a forced‑labour import prohibition; the notice states that “10 per cent is the appropriate rate of Section 301 duties” for these countries.
For India, this largely replaces the expiring Section 122 surcharge with a tariff of the same rate, but now on an open‑ended legal basis.
The impact will vary across sectors. Bilateral trade data show goods imports from India at $103.8 billion in 2025, dominated by textiles and garments, engineering goods, chemicals, gems and jewellery, machinery and plastics, alongside zero‑tariff pharmaceuticals and semiconductors. Many manufactured and labour‑intensive products will now face their normal most‑favoured‑nation (MFN) duty plus a 10 per cent Section 301 charge, while steel, aluminium and certain auto components continue to pay separate Section 232 national‑security tariffs of 25–50 per cent.
However, such across‑the‑board duty spikes can compress export margins and cut India’s shipments to the US by 5–7 per cent, with textiles, chemicals and engineering goods most exposed.
Earlier Trump‑era tariffs on China showed that India can gain limited market share through trade diversion, provided it can compete on cost and logistics.
The new Section 301 regime, for Indian exporters, means less pain than last year’s MFN‑plus‑50 per cent period, but a more durable, rules‑based headwind—something that could change with the ongoing India–US trade negotiations.
