NEW DELHI: The United States has proposed imposing an additional 12.5% tariff on imports from India and 53 other countries, citing their failure to effectively prohibit and enforce bans on goods produced using forced labour. The move, announced by the Office of the US Trade Representative (USTR) on June 3, has raised concerns in Indian trade circles as it comes amid ongoing bilateral trade negotiations between the two nations. 

According to the USTR’s investigation under Section 301 of the US Trade Act of 1974, 54 countries, including India, China, Japan, South Korea, Vietnam, Brazil, and the UK  have been identified as lacking adequate prohibitions or enforcement mechanisms against forced labour imports. Six other economies, including Canada, Mexico, the EU, and Pakistan, face a lower additional 10% tariff for partial compliance.

The USTR report specifically noted that India “has failed to impose and effectively enforce a forced labour import prohibition,” claiming this practice burdens US commerce and creates an uneven playing field. Sectors such as textiles, garments, electronics, steel, and agriculture are likely to be impacted if the proposal is implemented.

India has strongly rejected the allegations. The Commerce Ministry stated that New Delhi remains engaged with the US through the Section 301 process while simultaneously working towards finalising a bilateral trade agreement. Officials described the probe as unjustified and said India has robust laws against forced labour. Incidentally the proposal comes at a time when American officials are present in Delhi discussing the framework agreement details with India. 

The proposal is not final. The USTR has invited public comments till July 6 and scheduled hearings for July 7 before taking a final decision. Trade experts view this as a negotiating tactic by the Trump administration to extract better concessions from trading partners.

If implemented, the tariffs could affect a significant portion of India’s $80+ billion annual exports to the US. The development has added complexity to the ongoing India-US trade talks, which aim to deepen economic ties.