US Proposes Up to 12.5% Tariff on India Citing Forced-Labour Import Rules

The Office of the United States Trade Representative (USTR) has proposed new import duties on goods from around 60 countries, including India, under Section 301 of the US Trade Act of 1974. Together these countries supply nearly all of America's imports. Of the group, 54 nations — India among them — are accused of not having a proper legal ban on importing goods made using forced labour, and India has been placed in the higher tariff bracket of 12.5%. A lower 10% rate has been proposed for some others. The USTR has invited public comments and scheduled hearings, but the direction of policy appears clear.

The timing of the move is closely linked to recent legal setbacks for the United States. An earlier American policy of "reciprocal" tariffs, brought in through emergency economic powers, was struck down by US courts. After that, a flat 10% levy was imposed on all trading partners using a different law, but that measure can stay in force only for a limited period unless extended by the US Congress. The fresh Section 301 investigation and its proposals give the US administration a new legal route to keep tariffs in place even after the temporary levy lapses.

The justification offered — that countries like India follow unfair trade practices by failing to block forced-labour imports — rests on contested ground. Critics see it as one more way to restrict imports rather than a genuine concern about labour rights. A separate US investigation has also been launched into so-called excess manufacturing capacity in 16 economies, again including India and China. This pattern suggests that high tariffs are likely to remain a central tool of American trade policy regardless of legal challenges.

For India, the development matters because trade with the United States is large and the two sides are still finalising a framework trade agreement announced earlier in 2026. Indian officials have said they are engaging with Washington while continuing those talks. The key challenge for Indian negotiators is to push for better access to the US market while protecting domestic industry, and to treat shifting tariff threats with caution given the unpredictable nature of US trade decisions.

For exam aspirants, this episode illustrates how trade law, the World Trade Organization framework, and bilateral diplomacy interact, and why India's strategy of seeking market access while safeguarding its own interests is central to its external economic policy.