US Proposes 12.5 pc Tariff on Indian Imports Over Forced Labour Concerns

Chennai: The US has proposed 12.5 per cent tariffs on imports from India under Section 301 of the US Trade Act of 1974 over forced labour-related concerns. This is the first tranche of tariffs proposed following the probe under Section 301 by the United States Trade Representative.

Section 301 tariffs of 10 per cent or 12.5 per cent have been announced on imports from 54 economies, including India. Under the proposal, economies such as Canada, the European Union, Mexico, Indonesia, Malaysia, Taiwan and the United Kingdom would face a 10 per cent tariff as these jurisdictions have either full or partial prohibitions on the import of goods produced through forced labour.

India has been grouped with countries including China, Japan, South Korea, Brazil and Switzerland, which would face a 12.5 per cent tariff for not having sufficiently effective prohibitions or enforcement mechanisms in place to prevent forced labour-linked products from entering supply chains.

“The Section 301 investigations were divided into two parts. The findings in respect of labour issues have come out and these tariffs could go higher once the findings with respect to excess production capacities in different sectors also is announced. So, there is a possibility of countries, including India, facing much higher tariffs,” said Abhijit Das, former head of Centre for WTO Studies.

According to him, these tariffs, similar to reciprocal tariffs and 10 per cent tariffs under section 122, are illegal under WTO norms.

The 12.5 per cent tariffs exceed USA’s WTO commitment as they exceed bound duties. Hence, they are WTO illegal,” said GTRI. “: India can argue that the investigation exceeds the scope of Section 301, which traditionally addresses market-access barriers faced by U.S. firms rather than a country's import-control policies,” said Ajay Srivastava, founder GTRI.

The tariffs can also be challenged in the US courts, the way other tariffs were challenged.

“It's quite likely that the Section 301 tariffs will be challenged. How the US courts will view it, I'm not very sure, but we can't rule out the possibility that the US courts might rule against Section 301 tariffs as well. But there are a few other sections in the US statute under which President Trump could impose other types of tariffs as well,” said Das.

India has been negotiating a bilateral trade deal with the US even after the withdrawal of reciprocal and punitive tariffs and Section 301 tariffs is said to be one of the main reasons bringing the Indian side to the negotiating table. However, there is no guarantee that the US will withdraw the Section 301 tariffs even after a deal.

“Nothing prevents President Trump from unleashing his barrage of tariffs in future against India as well as other countries. So that is a very big risk which we will continue to face the tariff despite a bilateral trade agreement,” said Das.

Public hearings on the proposed tariffs are scheduled for July 7. Final tariffs could be announced by late June or July, potentially before the expiry of the 10 per cent Section 122 tariffs on July 24, 2026.