The US has proposed a 12.5% additional tariff on imports from India, citing failure to curb imports made with forced labor, complicating ongoing trade talks between the two nations.
The United States has proposed an additional tariff of 12.5% on imports from India , citing the country's failure to impose and enforce a prohibition on imports made with forced labor .
This move targets India among 60 economies identified by the U.S. Trade Representative's office as not adequately addressing forced labor in their supply chains. The proposal comes at a sensitive time, as Indian trade officials are midway through three days of talks with a U.S. delegation led by Assistant USTR Brendan Lynch in New Delhi.
The USTR's 92-page report, released on Tuesday, explicitly named India as having policies that are unreasonable and burden U.S. commerce, particularly in the context of forced labor. U.S. Trade Representative Jamieson Greer stated that this failure creates an unlevel playing field for American workers who are forced to compete with goods produced under coercive conditions.
The proposed tariff is part of a Section 301 investigation into unfair trade practices, initiated as the Trump administration seeks to rebuild emergency tariffs that were struck down by the Supreme Court in February. The report categorizes countries into two tiers: 54 economies, including India, that lack a forced-labor import prohibition face the higher 12.5% tariff, while six others-Canada, Ecuador, the European Union, Indonesia, Mexico, and Pakistan-that have such prohibitions but fail to enforce them effectively face a lower 10% tariff.
This distinction underscores the U.S. assessment that India has not taken even basic legislative steps to prevent imports of goods made with forced labor. The Indian commerce ministry responded on Wednesday, emphasizing that the proposed tariffs are not final and that the USTR will consider public comments before deciding. India said it remains engaged with the U.S. as part of the Section 301 proceedings and is also working on finalizing a broader framework agreement unveiled in February.
An Indian government source told Reuters that New Delhi planned to raise the Section 301 investigation with Lynch's team and seek tariff relief as part of a bilateral trade deal. However, trade experts caution that the two issues should be kept separate. Ajay Srivastava, founder of Global Trade Research Initiative, noted that the USTR investigation focuses on whether India blocks imports tied to forced labor elsewhere, not on forced labor in Indian exports.
He argued that the proposed tariffs are part of broader U.S. pressure tactics and that India should treat them independently from the bilateral trade agreement negotiations. The USTR report also identified India as an intermediary in cotton supply chains linked to Chinese forced-labor inputs, raising concerns about India's role in facilitating goods produced under coercive conditions. The U.S. has called for public comments on the tariff plans by July 6, with a hearing scheduled for July 7.
This development adds tension to the ongoing trade talks, which aim to resolve outstanding disputes and enhance economic cooperation. The proposed tariff could affect a wide range of Indian exports, including textiles, agricultural products, and manufactured goods, potentially impacting billions of dollars in trade. India has previously contested similar U.S. measures at the World Trade Organization and may consider legal avenues if the tariffs are imposed.
For now, the two sides continue to negotiate, with the Indian government seeking to protect its economic interests while addressing U.S. concerns. The outcome of the talks and the public comment process will determine whether the tariff is implemented or if a compromise can be reached.
Meanwhile, businesses on both sides are watching closely, as any escalation could disrupt supply chains and increase costs for consumers. The U.S. insistence on forced labor issues reflects a broader trend in trade policy, where labor standards are increasingly used as a tool for protectionism or leverage in bilateral negotiations. India, for its part, maintains that it has robust laws against forced labor and that the U.S. allegations are unfounded.
The coming weeks will be critical in shaping the future of India-U.S. trade relations
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