US Section 301 Forced-Labour Tariff on India: 45% of Exports Exempted
The Office of the United States Trade Representative (USTR) finalised Section 301 tariffs on 60 economies following an investigation into failures to impose and effectively enforce a ban on importing goods made with forced labour.
India was placed in the lower tariff band, facing an additional 10% duty rather than the 12.5% imposed on several other investigated economies.
The Commerce Ministry stated that about 45% of India's exports to the US — including generic pharmaceuticals, smartphones, and goods already covered under separate Section 232 duties such as steel, aluminium, and auto parts — fall outside the scope of the new duty.
The remaining roughly 55% of India's exports will attract the new 10% duty in addition to existing tariff lines.
The development comes as India and the US continue negotiations toward a Bilateral Trade Agreement (BTA), following a February 2026 interim deal that had already rolled back an earlier 50% tariff to 18%.
Section 301 of the US Trade Act, 1974
Section 301 authorises the US Trade Representative to investigate and act against foreign trade practices that are "unjustifiable," "unreasonable," or "discriminatory" and that burden US commerce. It is a unilateral trade-remedy tool distinct from tariffs imposed under multilateral WTO dispute settlement.
India's placement in the 10% (rather than 12.5%) tier, and the carve-outs for pharma, smartphones, and Section 232-covered goods, together explain why 45% of Indian exports remain outside the new duty's reach.
WTO Most-Favoured-Nation Principle vs. Unilateral Tariff Action
The Most-Favoured-Nation (MFN) principle under Article I of GATT requires WTO members to extend the same tariff treatment to all trading partners, with trade remedies (anti-dumping, countervailing, safeguard measures) typically administered through defined multilateral procedures rather than unilateral domestic statutes.
Key Details
- GATT (1947, superseded by GATT 1994 under the WTO) is the foundational treaty governing tariff and trade rules.
- Anti-dumping measures are permitted under GATT Article VI; safeguard measures under the WTO Agreement on Safeguards.
- Unilateral tariff actions such as Section 301 measures operate outside the WTO's dispute-settlement architecture and have repeatedly drawn objections at the WTO from affected members, including India.
The forced-labour tariff is a unilateral US domestic-law action rather than a WTO-sanctioned trade remedy, illustrating the tension between bilateral leverage tools and multilateral trade governance that India has flagged in WTO forums.
India-US Bilateral Trade Agreement (BTA) Negotiations
India and the US have been negotiating a Bilateral Trade Agreement through 2025-26, running alongside — but distinct from — separate "reciprocal tariff" and forced-labour tariff tracks under different US legal authorities.
The new forced-labour duty adds a further variable to an already multi-layered India-US tariff relationship, even as both sides state they will continue engaging toward a comprehensive BTA.
- New Section 301 forced-labour tariff on India: 10% (lower of the two tiers used), effective July 2026
- Higher tier applied to other investigated economies: 12.5%
- Investigation scope: 60 economies, representing about 99% of total US imports
- Share of India's US exports exempted from the new duty: approximately 45% (generic pharma, smartphones, Section 232-covered steel/aluminium/auto parts)
- February 2026: India-US interim deal cut an earlier tariff from 50% to 18%
- August 2025: 50% tariff comprised a 25% reciprocal component plus a 25% component linked to Russian oil purchases