The Indian government has officially responded to the United States Trade Representative's (USTR) proposal to impose additional 12.5% tariffs on India and 59 other economies over allegations of using forced labour to produce imported goods. According to the Press Information Bureau statement issued on Wednesday, June 3, India remains engaged with the US on the matter as part of Section 301 proceedings. The government confirmed that India is also parallelly engaged with the US for finalisation of a framework agreement as was announced on 2nd February 2026 and in accordance with the joint statement released on 7th February 2026. Citing the USTR report, the government assured that the proposed tariffs are not yet final and stakeholders can submit requests to participate in public hearings by June 22. Written comments can be submitted until July 6, while public hearings will be held on July 7. The US agency will consider the comments and testimony received before taking a final decision on the proposed measures. As reported by IANS, the Commerce Ministry emphasized that discussions are continuing on a separate track focused on strengthening bilateral trade ties, with both sides working to finalise a framework agreement that emerged from the February 7 India-US joint statement. According to The Times of India, Commerce Minister Piyush Goyal said that the India-US trade deal was now down to finalising the 'commas and full stops' just two days before the new tariff proposal was announced.
The United States Trade Representative (USTR) has proposed to impose an additional 12.5% tariff on India and 59 other economies over allegations of using forced labour to produce imported goods. According to reports from USTR, the move cites failure to enforce rules against importing goods made with forced labour. The action is based on Section 301 of the Trade Act of 1974 targeting unfair trade practices that burden or restrict U.S. commerce. On Wednesday, the Office of the United States Trade Representative revealed the findings of 60 Section 301 probes, with 54 of the economies failing to impose and effectively enforce a forced labor import prohibition, making them subject to the higher 12.5% tariff rate. The investigations were initiated on March 11 and 12, 2026, with the USTR reviewing testimony from nearly 60 witnesses and receiving about 500 submissions during the public consultation process before reaching its findings. The proposed tariffs target economies that together account for 99.4% of U.S. imports, as reported by Moneycontrol. However, the measures are not yet final and remain subject to public consultation and review, with the USTR proposal forming part of a broader trade policy push by the Trump administration as it seeks to reshape trade relationships. According to The Times of India, the tariffs remain at a proposal stage and the final decision is likely to come by July itself in time for the expiry date of the Section 122 tariffs of 10% that are currently in place.
The proposed tariff would impact a total of 60 economies, with 54 countries facing 12.5% tariffs and 6 countries subject to 10% tariffs. Major trading partners including India, China, Japan, South Korea, Brazil, and Switzerland are among those facing the higher 12.5% levy. The 10% rate applies to imports from Canada, Mexico, the European Union, Taiwan, and Pakistan, which were deemed not to have effectively enforced forced labour prohibitions. As reported by USTR, the affected countries span multiple regions including Asia, Europe, Latin America, and the Middle East. The complete list includes Algeria, Angola, Argentina, Australia, Bahamas, Bahrain, Bangladesh, Brazil, Cambodia, Chile, China, Colombia, Costa Rica, Dominican Republic, Egypt, El Salvador, Guatemala, Guyana, Honduras, Hong Kong, India, Iraq, Israel, Japan, Jordan, Kazakhstan, Kuwait, Libya, Malaysia, Morocco, New Zealand, Nicaragua, Nigeria, Norway, Oman, Peru, Philippines, Qatar, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Sri Lanka, Switzerland, Taiwan, Thailand, Trinidad and Tobago, Türkiye, UAE, UK, Uruguay, Venezuela, Canada, Ecuador, and the European Union. Countries that have already implemented or pledged to implement bans on imports linked to forced labour may be subjected to an additional 10% tariff, while those without such measures could face the higher 12.5% duty. The proposed tariff structure also includes a separate textile mechanism under which a limited volume of apparel and textile imports from certain economies could enter the U.S. at reduced tariff rates, though USTR did not immediately specify which countries would qualify. According to the latest government clarification, products covered under section 232 tariffs and certain other products are excluded from these tariff proposals, providing some relief to affected sectors. As reported by The Times of India, India and the US announced a trade agreement in February this year, under which the tariffs on Indian exports were reduced to 18% from 50%, but before the framework could be finalised the US Supreme Court ruled that the reciprocal tariffs by the Donald Trump administration are illegal.
According to the Global Trade Research Initiative (GTRI), India's inclusion on the list stems primarily from its reliance on Chinese inputs that have faced scrutiny over alleged forced labour in Xinjiang. As reported by The Times of India, India falls in the group of 54 economies found to have failed to impose and effectively enforce a prohibition, making it subject to the higher 12.5% tariff rate. However, India can credibly demonstrate even a partial forced labour import prohibition regime before the process concludes, which would bring it down to 10%. In the textile and garment sector, Indian manufacturers frequently use Chinese yarns and fabrics, which could face tighter traceability requirements if linked to cotton produced in Xinjiang. While India prohibits forced labour under the Bonded Labour System (Abolition) Act, 1976, exporters may still come under scrutiny because many industries depend on imported intermediate goods from China. The textiles, garments, thread and yarn sectors are among the most vulnerable to forced labour concerns, making India's textile and apparel industry a major casualty. Gems and jewellery exports, which make the US one of the largest export destinations for Indian products, could face price increases for American consumers. Leather goods manufacturing sector may also face increased pressure as leather products and footwear become costlier for US buyers. Seafood exports, particularly shrimp, could face another setback after already being affected by previous US trade measures. Automobiles and auto components exports could also be affected, making these products more expensive for US buyers. However, there is some potential relief through a textile mechanism that would allow certain volume of apparel and textile imports from certain economies to enter the United States at reduced Section 301 tariff rates, though the exact details including volume caps and qualifying products remain unclear. Additionally, pharmaceuticals and electronics have been exempted from the proposed additional tariffs, though these exemptions are subject to finalization after the July 6, 2026 public comment period.
The trade agency has invited written comments on the proposed tariffs until 6 July, and a Section 301 panel is expected to convene public hearings beginning on 7 July, according to the notice from USTR. Interested parties can submit requests to participate in USTR hearings until June 22, 2026, while written comments can be filed until July 6, 2026. The proposed tariffs will test the tolerance of economic partners, who have largely refrained from retaliating, opting instead to negotiate deals with the US to ensure market access. The USTR's tariff proposal comes as Assistant USTR for South and Central Asia Brendan Lynch, who is also chief negotiator for the India-US Bilateral Trade Agreement (BTA), is leading a team of officials to advance trade deal negotiations in New Delhi this week. India and the US had finalised an interim trade deal in February that proposed a reciprocal tariff of 18% on Indian goods, but the US Supreme Court struck down these reciprocal tariffs imposed by President Donald Trump under the International Emergency Economic Powers Act. Commerce Minister Piyush Goyal said on Monday that "Now we only have to see how we can incorporate the legal changes in the US (following the US Supreme Court verdict) within the trade deal." The proposed tariff of 12.5% is likely to be finalised by July 24, before the expiration of the baseline duty. Following the US Supreme Court ruling, Trump imposed a blanket tariff of 10% on all trading partners until July 24. The USTR had in March also initiated another Section 301 investigation alleging overcapacity among its trading partners, including India, with Washington yet to release its findings from that investigation. For US trading partners that have so far avoided retaliation and opted instead to negotiate bilateral arrangements, the new proposals raise the stakes considerably, with Canada's trade minister LeBlanc noting this week that his country has been preparing for precisely this type of Section 301 investigation. The tariff proposal has emerged alongside intensified trade engagement between New Delhi and Washington, with senior officials from both countries currently participating in a three-day round of discussions in New Delhi aimed at finalising an interim bilateral trade agreement.
