Winning Bizness Desk

Mumbai.Washington has proposed additional tariffs of up to 12.5% on imports from India and dozens of other economies after accusing them of failing to adequately prevent goods produced through forced labour from entering global supply chains. The move comes at a sensitive moment, with senior US trade officials currently in New Delhi for crucial negotiations on a bilateral trade agreement.

Why India has come under scrutiny

The Office of the United States Trade Representative (USTR) has released findings from an investigation conducted under Section 301 of US trade law. The report names 54 economies, including India, alleging that they lack sufficient and effective legal mechanisms to prevent the import or circulation of goods linked to forced labour.

According to the US administration, inadequate enforcement creates unfair competition for American workers and businesses. The findings could pave the way for retaliatory trade measures against the countries identified in the report.

Proposed tariff rates explained

Based on its assessment, the USTR has suggested imposing additional customs duties ranging from 10% to 12.5% on affected imports.

Key proposals include:

• 10% extra tariff on countries that have partially implemented relevant measures or have indicated willingness to comply in the future.
• 12.5% extra tariff on countries considered unprepared or unwilling to align with the US framework.

If implemented, these duties would be levied over and above existing tariffs, making imports from affected nations more expensive in the American market.

US administration signals tougher action

US Trade Representative Ambassador Jamieson Greer said it was unacceptable for major trading partners to fail to stop imports linked to forced labour.

He argued that such practices force American workers to compete on an uneven global playing field. The US administration has indicated that further trade action may follow based on the investigation's conclusions.

What Section 301 allows Washington to do

Section 301 is a provision of the US Trade Act of 1974 that empowers the USTR to investigate foreign trade practices deemed harmful to American commercial interests.

Under the law, Washington can impose:

• Higher tariffs
• Import restrictions
• Other trade-related penalties

Once a country is found to be violating or undermining US trade objectives.

Major economies on the list

India is not alone in facing scrutiny. The USTR's list includes several major economies:

• China, Brazil, the United Kingdom and Japan
• South Korea, Singapore and Australia
• Russia, Saudi Arabia and South Africa
• Sri Lanka and Thailand

In addition, Canada, the European Union, Mexico, Pakistan, Indonesia and Ecuador have been placed in a separate category for inadequate implementation of the law.

Trade deal talks enter a critical phase

The timing of the report is particularly significant because a high-level US delegation is currently in New Delhi for a three-day round of negotiations.

Both countries have spent the past 15 months working towards the first phase of a Bilateral Trade Agreement (BTA). The release of a critical report during ongoing discussions is expected to add pressure to the negotiating table.

Commerce and Industry Minister Piyush Goyal recently said that 99% of the agreement had been finalised, with discussions now focused on minor issues and incorporating recent legal changes in the United States. He expressed confidence that the first tranche could be signed soon.

Uncertainty remains over final agreement

Despite progress, an immediate conclusion to the trade deal appears unlikely.

The temporary 10% tariff imposed by the Trump administration is due to expire next month, and India is seeking greater clarity on Washington's future tariff framework before committing to a final agreement. New Delhi wants to ensure Indian exporters remain competitive against rival nations in the US market.

India also faces a second Section 301 investigation related to alleged excess production capacity in sectors such as solar modules, processed food, steel and aluminium. Fourteen other countries are part of that probe.

What it could mean for exporters

If the proposed tariffs come into force, Indian goods could become costlier in the US, potentially affecting export competitiveness and shipment volumes.

However, the USTR has suggested a separate mechanism for textiles, under which selected countries may be allowed to export a fixed quantity of garments at lower tariff rates, offering limited relief to some exporters.