The Donald Trump administration’s Section 301 probe and threat of fresh tariffs has added a layer of uncertainty for several countries including India.The United States Trade Representative (USTR) has advanced one of its two investigations into America’s trading partners, even as the July 24 deadline for the temporary 10% additional tariff draws closer.Between Tuesday and Thursday, the USTR is conducting public hearings on its investigation into alleged forced labour practices, covering 60 economies. As part of that probe, it has proposed imposing an additional 12.5% tariff on imports from more than 50 countries, including India, over what it claims is inadequate action against goods linked to forced labour—an allegation that the Indian government has rejected.However, the USTR has yet to release its preliminary findings in the separate investigation concerning alleged structural excess capacity across multiple sectors.Also Read | India’s economy passed the Iran war test. Could El Nino spoil the party?According to policymakers and trade experts, the pace of the investigation suggests that the US may replace the existing 10% tariff, which remains in force until July 24, with the proposed forced labour-related tariff.
Section 301 probe: India in focus among other countries
What is India’s stand?
The Indian government has urged the Office of the United States Trade Representative (USTR) to withdraw its proposal to levy the additional 12.5% tariff on Indian exports over allegations related to forced labour. India has made the following points:
- It has been argued that the proposal falls short of the required legal standards.
- In its submission, the government contended that the USTR has neither undertaken a country-specific assessment nor demonstrated a direct causal relationship between India’s import policies and any adverse impact on US businesses.
- In a nine-page representation submitted ahead of hearings that began on Tuesday, the government said that addressing forced labour in global supply chains requires a combination of robust domestic labour law enforcement and effective due diligence frameworks that incorporate both risk mitigation and remedial measures.
In its submission, the commerce and industry ministry maintained that the USTR had failed to satisfy the legal requirements laid down under Section 301(d) of the US Trade Act.It also argued that the proposal does not provide sufficient evidence to establish that the absence of import prohibitions distorts market conditions or harms the profitability of businesses that comply with labour standards.The government also argued that any findings by the USTR must be supported by country-specific evidence to carry legal and factual credibility. It said the proposed action instead relies on isolated case studies and broad trade patterns rather than an assessment specific to India’s circumstances.Although India and the US have continued discussions, including at the ministerial level, to finalise the framework for the first phase of their proposed trade agreement, the tariff structure needed to operationalise the deal is unlikely to be settled until the Trump administration unveils its revised tariff regime.
Section 301: What India needs to know
India has maintained that any agreement must preserve a tariff advantage over competing exporting nations such as China, Vietnam, Bangladesh and ASEAN countries.Exporters, however, may find some relief if the existing 10% tariff is replaced by the proposed 12.5% levy, as the measure would apply to most of India’s competing exporting countries across a wide range of product categories.According to the government’s submission, there is insufficient evidence to establish that the absence of a forced labour import ban in India gives the country an unfair competitive advantage at the expense of US industry. It maintained that data from major export sectors does not indicate any connection between Indian exports to the US and the use of forced labour inputs.Referring to three examples cited in the USTR report, the government said the determination fails to demonstrate how India’s actions, policies or practices burden or restrict US commerce. It pointed out that US tobacco imports increased from $225,000 in 2021 to $3.5 million, while imports from Malawi remained at zero, suggesting there was no adverse impact on US trade.The submission also highlighted that the US imported none of the concerned commodity from Myanmar, whereas the US itself was among the few countries exporting that commodity to India.It further noted that US cotton imports rose from $213 million in 2021 to $392 million in 2025, even as imports from China declined over the same period.
India’s stand on the Section 301 probe
Indian companies oppose
Several Indian companies, including Reliance Industries, Alok Industries, Shahi Exports and a number of solar manufacturers, have also challenged the proposal, TOI reported. They argue that the proposed duty effectively replaces the reciprocal tariffs introduced by Donald Trump, which were subsequently struck down by the US Supreme Court.A number of Gujarat-based exporters, including Parth Foods, Hanumant Foods, Maruti Exports and Rajdhani Dehydration, which supply dehydrated onions and garlic to US buyers, have also opposed the proposal. They argued that imposing the additional tariff would increase costs for American consumers, including manufacturers of seasoning products.Also Read | 145% rise in LPG imports: Gas buys to be doubled from US – how much can it help India cut reliance on Gulf supply?
India-US trade deal
Meanwhile, India and the US continue negotiations in finalising the first phase of the India-US bilateral trade agreement. As per the deal announced in February, tariffs on Indian goods were reduced t0 18%, but that later came down after the US Supreme Court ruled that Trump’s reciprocal tariffs are illegal. The Donald Trump administration immediately announced 10% global tariffs on its trading partners that are set to expire in the coming weeks.This has added a layer of uncertainty to the trade deal and trade experts believe that the Section 301 probe launched on many countries is a pressure tactic by the US to get trade deals on its terms.While acknowledging that the trade deal is almost finalised, Commerce minister Piyush Goyal has said that India will agree only if it gets a competitive advantage over its peers.
