US proposes 12.5% duty on Indian goods over forced labor concerns
The US Trade Representative has proposed an additional 12.5% duty on 54 countries, including India, over alleged failure to restrict imports of goods produced with forced labour.
This move, seen as a pressure tactic, comes as India and the US are negotiating an interim trade deal.
New Delhi: In a move that could add pressure on India to quickly conclude a bilateral trade deal with the US, the US Trade Representative on Wednesday proposed an additional 12.5% duty on 54 countries, including India, over alleged failure to restrict imports of goods produced with forced labour in third countries.
It has proposed new tariffs on most Indian goods.
India said it is engaged with the US on investigations under Section 301 of the US Trade Act of 1974, concerning forced labour and excess industrial capacity. This comes at a time when India and the US are engaged in a three-day discussion in New Delhi to finalise the details of an interim deal ahead of the proposed bilateral trade agr eement (BTA).
Meanwhile, Canada PM Mark Carney said the country shares US' concerns about the use of forced labour and would soon propose its own measures to clamp down further on the practice.
‘No Final Decision on Levy Yet’
“India remains engaged with the US on the matter as a part of Section 301 proceedings,” the commerce and industry ministry said in a statement. “India is also parallelly engaged with the US for finalisation of a framework agreement…”
The USTR proposal follows investigations launched against 60 countries over what it described as their failure to impose and effectively enforce bans on imports of goods made with forced labour. “Specifically, the US Trade Representative proposes additional duties on all products of the investigated economies, except as provided in annex A,” it said.
The annex includes meat products, food items, chemicals, certain coal, ores, natural gas, petroleum products, uranium and pharmaceuticals, among others.
The USTR said its investigation indicated “that the acts, policies and practices of India related to the failure to impose and effectively enforce a forced labour import prohibition are unreasonable and burden or restrict US commerce.”
Trade experts said India has several grounds to challenge the probe and that it could be a pressure tactic to make New Delhi yield to other demands.
The commerce and industry ministry noted that the proposed tariffs are not final, and stakeholders can participate in public hearings to be held on July 7. “The USTR will consider the comments and testimony received before taking a final decision on the proposed measures,” it said.
Also, products covered under Section 232 tariffs, such as steel and aluminium, and certain other products are excluded from the tariff proposals. “A special mechanism has also been proposed for textile and apparel products that could allow a certain volume of imports from selected economies to enter the US at lower tariff rates,” the ministry said, although specific rates have not yet been finalised.
The USTR had launched two separate Section 301 investigations on March 11 and 12, 2026, covering 60 economies over concerns related to forced labour and excess industrial capacity. On June 2, it issued its findings in the forced labour investigation and proposed additional tariffs on imports from 60 economies. The proposal includes additional 10% tariff on imports from Canada, Ecuador, the EU, Indonesia, Mexico and Pakistan, and additional 12.5% tariff on imports from 54 other economies, including India and China.
Pressure Tactic
“The move is a pressure tactic for us to yield on trade and oil-related demands. India should be cautious,” a trade expert said on the condition of anonymity.
India should be prepared for additional Section 301 tariffs in areas such as excess capacity, where the US is conducting another investigation, the person added.
Think tank GTRI said New Delhi should challenge the ambit of the probe.
“The current investigation exceeds the scope of Section 301, which deals with market-access barriers faced by the US firms in the country being investigated and not what it imports and from where,” GTRI founder Ajay Srivastava said.
India must argue that the US is attempting to impose its preferred import-control framework on other countries through unilateral trade measures, which is outside the scope of Section 301, he said.
“India may also argue that concerns regarding forced labour, particularly in countries such as China, are often product-specific and that the US itself remains a major importer of many of the products at issue,” Srivastava said. “Hence, broad country-wide tariff actions are an inappropriate response when the problem could be limited to a few products.”
