US Proposes New 12.5% Tariff on Indian Goods Under Section 301

On 4 June 2026, the United States announced a plan to impose a new 12.5 percent tariff (an import tax) on a wide range of goods coming from India. The duty would be levied under Section 301 of the US Trade Act of 1974, a law that lets the US act against trade practices it sees as unfair. If it goes ahead, the tax could start either later in June or in early July 2026. India is one of 54 economies named in this move; several others, including Canada, Indonesia, Mexico and the European Union, face a lower 10 percent duty.

The proposal comes from two investigations the US trade office opened in March 2026. One looked at the use of forced labour in supply chains, and the other at what the US calls excess industrial capacity in other countries. India has been targeted on the ground that it does not ban imports of goods made with forced labour elsewhere. Before any tax takes effect, the US has asked affected countries to send written comments by 6 July 2026 and plans a public hearing on 7 July 2026.

The timing is important. After the US Supreme Court struck down an earlier set of so-called reciprocal tariffs in February 2026, the US government quickly placed a temporary 10 percent duty under Section 122 of the same law. That order can last only 150 days, up to 24 July 2026, and would need approval from the US Congress to continue, which looks unlikely. Section 301 tariffs follow a formal investigation, so they are harder to remove and give the US a longer-lasting tool of pressure in trade talks.

For India, the move lands at a sensitive moment, as the two countries are close to signing a Bilateral Trade Agreement (BTA), a deal that sets the terms of trade between two nations. A US negotiating team is already in India for talks. Many trade experts advise India to keep the two issues separate: sign the BTA only if it genuinely benefits the country, and legally challenge the new tariff, since using Section 301 over forced-labour rules may go beyond what the law was designed to cover.

For aspirants, remember the key facts: Section 301 of the US Trade Act of 1974 is the legal basis, the proposed rate on India is 12.5 percent, the comment deadline is 6 July 2026, and a BTA is a bilateral trade agreement. Note the difference between Section 301 (investigation-based, durable) and Section 122 (temporary, time-limited) tariffs.