US slaps 10% tariff on Indian imports over forced labour concerns
The United States Trade Representative announced new tariffs under Section 301 of the Trade Act of 1974 on around 60 trading partners, citing failure to act against forced labour in supply chains
Indian goods were placed in the lower of two tariff tiers, facing an additional 10% duty rather than the 12.5% rate applied to economies without a comparable forced-labour import prohibition
The action took effect as a separate temporary 10% tariff, imposed in February 2026 under Section 122 of the Trade Act of 1974, expired on the same date
Unlike Bangladesh, Indonesia, Cambodia, and Malaysia, India's textile and apparel exports were not granted the accompanying tariff-rate quota (TRQ) relief tied to the use of US-origin cotton and fibre, leaving Indian textile exporters facing the full 10% duty on all volumes
Section 301 of the US Trade Act, 1974
Section 301 (Title III, Sections 301-310) is the primary US statute empowering the Office of the United States Trade Representative (USTR) to investigate and respond to foreign trade practices it deems "unfair," "unreasonable," or "discriminatory." Where a practice is found unjustifiable and burdens US commerce, USTR's response is mandatory; where a practice is merely unreasonable or discriminatory, action is discretionary. Remedies include imposing tariffs, suspending trade-agreement concessions, or negotiating a binding agreement with the foreign government.
Key Details
- Enacted as part of the Trade Act of 1974; unlike the International Emergency Economic Powers Act (IEEPA), used by the US for earlier 2025-26 tariff actions until the Supreme Court held in February 2026 that IEEPA does not authorise tariffs, Section 301 rests on an explicit statutory trade-remedy power
- USTR initiated investigations into 60 economies in 2026 over inadequate action on forced labour in supply chains; findings were used to justify tiered tariffs of 10% (for economies with a forced-labour import prohibition, including India) and 12.5% (for the rest)
- Determinations under Section 301 are typically required within 12 months of investigation initiation for cases not tied to a trade agreement
The current forced-labour tariffs are a Section 301 action, distinguishing them from the broader, geographically undifferentiated Section 122 surcharge they replace.
Section 122 Balance-of-Payments Tariff (contrast)
Section 122 of the Trade Act of 1974 allows the US President to impose a temporary import surcharge of up to 15% to address a serious balance-of-payments deficit, capped at 150 days unless extended by Congress. Following the Supreme Court's February 2026 ruling that IEEPA could not be used to impose tariffs, the administration invoked Section 122 for the first time in US history, applying a flat additional 10% tariff on virtually all imports irrespective of country of origin from late February 2026.
Key Details
- Section 122 tariff proclaimed February 20-24, 2026; statutorily capped at 150 days, expiring July 24, 2026
- A US Court of International Trade ruling in May 2026 held the Section 122 tariff unlawful, finding the stated balance-of-payments justification insufficient; the ruling's practical effect remained limited pending appeal
- Section 122 applies uniformly across countries, unlike Section 301, which is calibrated to country-specific findings
The Section 301 forced-labour tariffs were timed to take effect exactly as the Section 122 surcharge lapsed, effectively substituting one tariff mechanism (country-blind, balance-of-payments-based) with another (country-differentiated, unfair-practice-based) so overall US tariff levels on most partners, including India, remained largely unchanged.
Tariff-Rate Quota (TRQ) as a Trade Policy Instrument
A tariff-rate quota is a two-tier import mechanism that applies a lower "in-quota" tariff to a fixed volume of imports and a higher "out-of-quota" tariff beyond that volume, without imposing an absolute cap on quantity. TRQs became widespread after the WTO's Uruguay Round Agreement on Agriculture (1995), which required converting non-tariff barriers into tariff-based systems while preserving minimum market access.
Key Details
- Under the new US regime, Bangladesh, Indonesia, Cambodia, and Malaysia received TRQ relief allowing specified volumes of textile and apparel exports made with US-origin cotton and fibre to enter at reduced or preferential rates
- India was not extended this TRQ carve-out, so Indian textile and apparel exports face the full 10% forced-labour tariff on all volumes, with no preferential quota tier
- TRQs are commonly used in agriculture and textiles/apparel, sectors where importing countries seek to balance market access commitments against domestic-industry protection
The TRQ exclusion is a textile-sector-specific disadvantage layered on top of the general 10% tariff, meaning India's textile exporters do not get the relief that comparable competitor economies received even though India secured the lower headline tariff tier.
- New US tariff on Indian goods: additional 10% under Section 301, effective July 24, 2026, alongside 16 other economies in the lower tier (17 of 60 total)
- Higher-tier rate: 12.5% applied to the remaining roughly 43 of the 60 economies investigated
- Section 122 tariff it replaced: flat additional 10% on nearly all imports, in effect February 24-July 24, 2026 (150-day statutory limit)
- TRQ relief for US-origin-cotton textiles/apparel: extended to Bangladesh, Indonesia, Cambodia, and Malaysia; not extended to India
- Legal basis for the new tariffs: Section 301, Trade Act of 1974 (Title III); legal basis for the expired levy: Section 122, Trade Act of 1974