Trump administration imposes 10% Section 301 tariff on India as temporary duties expire

The Donald Trump administration has announced a fresh set of tariffs as its Section 122 duties expire on July 24. The new tariffs, imposed under the Section 301 probe, set India’s rate at 10%, down from the proposed 12.5% earlier, and take effect immediately.

The 10% rate also applies to 16 other economies, including India’s neighbours Bangladesh and Pakistan, and developed economies such as Canada and the United Kingdom. US Trade Representative Jamieson Greer announced revised tariffs on 60 economies on Thursday, one day before the expiry of temporary additional 10% duties that had been imposed on imports from all countries.

A total of 60 economies were being probed by the Trump administration under Section 301, and most will now face a 12.5% tariff rate.

Section 301 allows the United States to investigate imports of goods that it defines as made using forced labour and to impose tariffs on such goods. When the proposed tariffs were first announced on June 3, India had been placed in the 12.5% category.

Countries that do not have legal provisions banning the import of goods produced using forced labour, including China and Japan, will face a tariff of 12.5%. Some exemptions apply: the tariffs do not cover raw materials and agricultural inputs that cannot be produced in adequate quantities within the United States. They also exclude products whose taxation could trigger inflationary pressure or disrupt domestic supply chains.

Some industrial inputs, including specified plastic resins, metal products and medical supplies, as well as goods already covered under Section 232 tariffs and informational or humanitarian items such as books, personal baggage and charitable donations, are also exempted.

For imports from the European Union, Japan, South Korea, Taiwan and Switzerland, the Section 301 tariff will be calculated on a net-of-MFN basis. This means the combined tariff reaches the prescribed rate instead of adding the full Section 301 duty on top of the existing Most Favoured Nation tariff.

Following the latest decision, US tariffs on Indian exports broadly fall into three categories. Products covered by Section 232 include steel, aluminium, copper, auto components and certain derivative products. According to GTRI, they account for about 8% of India’s exports and face 25% or 50% tariffs in addition to the normal US MFN duty.

A limited set of exempted products continues to pay only the normal MFN tariff. About 70% of India’s exports, including engineering goods, chemicals, machinery, plastics, leather products, gems and jewellery, furniture and most other manufactured goods, are subject to the 10% Section 301 forced-labour tariff in addition to the applicable MFN duty.

GTRI also notes that India has not received the textile and apparel tariff-rate quota exemption under the new US Section 301 forced-labour tariff. The exemption applies to specified volumes of textile and apparel exports from Bangladesh, Cambodia, Indonesia and Malaysia that use US-origin cotton and fibre.

According to an ANI report, the lower tariff rate was secured after productive discussions between the two sides on labour practices. Officials told ANI that India had originally been placed in the 12.5% tariff category, but after constructive engagement with the United States on labour practices, the rate was reduced to 10%.

A few weeks ago, India announced that it had moved to ban imports of goods made with forced labour. According to the US Trade Representative notification, 10% is the appropriate rate for investigated economies that impose a forced-labour import prohibition, have committed to impose and enforce such a prohibition through an Agreement on Reciprocal Trade, or have imposed a partial regime that prevents the importation of certain forced-labour goods.

GTRI says India’s notification signalled that it is strengthening its domestic legal framework in line with international standards. The step may have helped strengthen its position in future trade negotiations and market-access discussions.

Experts see limited impact on India from the new tariffs, and some expect India to enjoy a relative advantage compared with developed economies that now face 12.5% tariffs. Manoj Mishra, Partner and Tax Controversy Management Leader at Grant Thornton Bharat, said the US Section 301 tariffs come into effect as the temporary Section 122 emergency tariffs expire, with India retaining a 10% tariff rate.

He said this places India on par with competing Asian exporters such as Bangladesh, Sri Lanka, Malaysia, Indonesia and Pakistan, while several advanced manufacturing economies, including Japan, South Korea, Switzerland, and certain products from the European Union and Taiwan, as well as key export competitors such as Vietnam, Thailand and Singapore, face an effective tariff of up to 12.5%.

Mishra said the relative tariff advantage could enhance India’s competitiveness in engineering goods, auto components, electronics, specialty chemicals, pharmaceuticals, medical devices, and textiles and apparel, where even a modest tariff difference can influence sourcing decisions by global manufacturers, retailers and brands.

He added that while the additional tariff increases export costs, India’s improved relative position presents an opportunity for businesses to strengthen their presence in global supply chains while reinforcing compliance with evolving labour and ESG standards.

Ajay Srivastava, founder of the Global Trade Research Initiative, said the 10% US tariff on Indian exports under the forced-labour investigation lacks a credible factual basis. He said the United States has not produced evidence that India imports goods made with forced labour.

Srivastava said India has already amended its Foreign Trade Policy to ban the import of goods produced using forced or compulsory labour, and that Indian law already prohibits forced labour in domestic production through constitutional guarantees and labour statutes.

He said the tariff appears to serve primarily as a mechanism to preserve the Trump administration’s tariff wall after the expiry of the temporary Section 122 tariffs, rather than as a targeted response to a proven forced-labour problem involving India.

Srivastava also warned that more tariffs could be imposed. He said the Trump administration is expected to announce the results of another Section 301 investigation into excess manufacturing capacity, which could lead to additional tariffs on a wide range of industrial products.

He added that Washington has increasingly imposed country-specific tariffs, recently targeting Brazil and Canada, and that similar measures could eventually be extended to India citing purchases of Russian oil or broader geopolitical considerations.