India Should Take Action Against US Tariff Barrage

Chennai: While the US continues its tariff barrage with the latest Section 301 tariffs, India should take action. India should raise the “illegal tariff” issue in various forums, seek partnerships and give the US a message that it may rethink the protection given to US patent holders in India, especially in the pharmaceutical sector, says Abhijit Das, former head of Centre for WTO Studies.

So the premise of the trade talks with the US was the reciprocal tariffs and then the punitive tariffs. Both these tariffs have been struck down by the US courts. We have also seen Malaysia walking out of the trade deal after the court ruling. Why didn't India walk out of the talks?

What we need to recall is that the India-US trade negotiations pre-date the reciprocal tariffs. When Prime Minister Narendra Modi and President Donald Trump met on February 13, 2025, the joint statement mentioned that the two countries would negotiate a bilateral trade agreement.

In the meantime, reciprocal tariffs were imposed, followed by punitive tariffs. These were later removed and replaced by tariffs under Section 122, which have been ruled against by lower courts and are likely to lapse by July 24.

The objective of India and the US in these negotiations is to arrive at an understanding that addresses the interests and concerns of both sides. Malaysia did indicate that its reciprocal trade agreement with the US was no longer valid after the court ruling. However, India continues negotiations because it wants to ensure that Section 301 tariffs, and any future tariffs, do not adversely impact its interests.

India's primary objective is to ensure its exports face the lowest possible tariffs. It is also important to remember that reciprocal tariffs, Section 122 tariffs and the newly announced Section 301 tariffs are all inconsistent with WTO rules.

Reports suggest India is negotiating to avoid Section 301 tariffs. The US has imposed tariffs of 10% to 12.5% on around 60 economies, including India, over labour-related concerns. Can the US impose additional tariffs under Section 301 for excess capacity?

The Section 301 investigations were divided into two parts. The findings relating to labour issues have already been released. India faces tariffs of 12.5%, while competitors in textiles and clothing such as Pakistan, Malaysia and Indonesia face tariffs of 10%.

These tariffs could increase further when findings from the second part of the investigation, relating to excess capacities, are released. There is a possibility that many countries, including India, may face tariffs significantly higher than the current 10% to 12.5%.

Even after the reciprocal and punitive tariffs, India's exports were marginally higher in FY26. Should India be worried about Section 301 tariffs?

If the same level of tariffs applies to India and its competitors, especially in labour-intensive sectors such as textiles, leather, gems and jewellery, India will not be at a disadvantage.

However, if India seeks lower tariffs for its exports, the US will expect concessions in return. The US is unlikely to offer tariff reductions without extracting something valuable in exchange.

Is there any guarantee that the US will withdraw Section 301 tariffs if a trade deal is signed? If not, why should India continue with the talks?

Under President Trump, there is absolutely no guarantee of anything. There is no certainty or predictability regarding tariffs that any country's exports may face in the US.

Whatever is agreed today, no one can say with certainty that India will not face higher tariffs in the future for other reasons or under another US statute. We have already seen punitive tariffs imposed because of issues linked to US geopolitical interests, such as India's purchase of Russian oil.

Nothing prevents future tariff actions against India or other countries. That risk will remain even after a bilateral trade agreement is finalized.

Then should India continue with the negotiations?

It is always useful to engage in negotiations. Commercial diplomacy should be given an opportunity.

However, India may have missed an opportunity by taking a relatively soft approach towards tariffs that were clearly inconsistent with WTO rules. India did not strongly challenge these tariffs at the WTO. It could have signalled that it would not passively accept such actions and could even have hinted at reviewing protections granted to US patent holders, particularly in the pharmaceutical sector.

Such steps could have strengthened India's bargaining position. Since India neither challenged the tariffs forcefully nor signalled possible action on intellectual property rights, its negotiating position became weaker.

Does raising these concerns at the WTO serve any purpose when the WTO itself has been unable to act effectively?

The issue is not only about obtaining a ruling. It is also about signalling and sending a strong message to the US.

Had India raised these concerns and secured support from other countries, it may have made the US think more carefully before pursuing coercive economic measures. Even if the WTO's paralysed appellate system prevented effective enforcement, India would still have gained bargaining chips and demonstrated resistance to unilateral actions.

If the trade deal is signed, how will it affect India's economic sovereignty and growth? What does India gain in return?

The potential gain is that India's exports in sectors such as textiles, clothing and leather could increase if India secures tariff advantages over competitors.

However, the concessions India may have to make could be significant.

In agriculture, India may have to reduce tariffs on products such as apples, almonds and walnuts. Lower tariffs on soybean oil could adversely affect domestic soybean producers, while reduced tariffs on oranges could hurt local growers.

The most serious concern relates to the Minimum Support Price (MSP) system. The US has been aggressively raising this issue at the WTO in Geneva and is likely to push it during bilateral negotiations as well.

If India is compelled to alter its MSP programme, the consequences could be severe for rice and wheat farmers. That said, there is currently no public information confirming whether MSP is formally part of the negotiations.

Other concerns include restrictions on India's ability to tax digital transactions and possible demands to amend patent laws, particularly Section 3(d) of the Patents Act, which prevents patent evergreening.

Any weakening of these patent protections could undermine India's generic pharmaceutical industry and eventually raise healthcare costs for millions of people who depend on affordable medicines.

To sum up, the disadvantages appear greater than the advantages. What is the status of negotiations involving other countries that entered agreements with the US during the reciprocal tariff period? Have they received exemptions from subsequent tariffs?

There is very little public information available.

Countries that negotiated reciprocal trade arrangements with the US were still subjected to the uniform 10% tariffs under Section 122. It remains unclear how those earlier agreements will be implemented going forward.

One possibility is that the US may use Section 301 tariffs as leverage to compel countries to honour commitments made under earlier reciprocal trade arrangements.

The reciprocal tariffs and Section 122 tariffs have faced legal setbacks in US courts. Could Section 301 tariffs also be struck down?

It is quite possible that Section 301 tariffs will face legal challenges.

Whether US courts will rule against them remains uncertain, but the possibility cannot be ruled out. However, even if Section 301 tariffs are struck down, there are other provisions in US law that could allow future administrations to impose different forms of tariffs.

As someone who has negotiated trade agreements for India, what advice would you give the government?

India should continue negotiating with the US, but at the same time it should have clearly communicated through the WTO that reciprocal tariffs and Section 122 tariffs violate WTO rules.

India should also have worked with other countries to build a common front. Additionally, it could have signalled that continued use of illegal tariffs might force India to reconsider protections granted to US patent holders, particularly in the pharmaceutical sector.

Such measures could have been implemented in a calibrated manner and would have strengthened India's position. Instead, the government has placed almost all its emphasis on negotiations. We now have to wait and see whether this approach results in an agreement that is fair, balanced and equitable.

Is there anything India can still do at this stage?

It is never too late to raise these concerns in international forums.

It is also not too late to signal that India may reconsider the level of protection provided to US patent holders if the current tariff regime continues. Such signalling can still play an important role in shaping negotiations and improving India's bargaining position.