Can US levy more tariffs on India for ‘excess capacity, forced labour'? Section 301 investigations explained

As India and the US begin finalising the long-pending trade deal in Delhi from 1 June to 4 June, key industries are keenly awaiting any announcements on tariffs levied by the US on Indian imports.

According to a report in Business Standard, US has assured India that it will not be imposing any additional tariffs under Section 301 of the US Trade Act, 1974 if the two nations sign the deal before 24 July, when the current 10% baseline tariff is scheduled to expire.

The 10% baseline tariff was temporarily applied to all of US' trading partners for a 90-day-window after the US Supreme Court in February struck down the reciprocal tariffs levied by the President Donald Trump, calling them “unconstitutional.”

What is Section 301?

Section 301 of the US Trade Act, 1974 is used by the American government to combat unfair trade practices by foreign countires.

It allows an Executive Branch of the Office of the United States Trade Representative (USTR) to investigate foreign governments and retaliate—primarily by imposing unilateral tariffs—if those governments harm American commerce.

The USTR can pull up foreign governments if it finds their trade practices violate international agreements, discriminate against or burden US companies. Other triggers include:

• intellectual property theft,
• forced technology transfers,
• systemic labor rights violations,
• market access restrictions, and
• industrial subsidies that create massive oversupply.

Why US is investigating India

In March this year, the US initiated Section 301 investigations against its trading partners — including India, China, Japan and the EU — over allegations of excess capacity in manufacturing and the use of forced labour in global supply chains.

These investigations were widely seen as a Trump's alternate to impose tariffs under a different law and make up for lost revenue after the US Supreme Court struck down reciprocal tariffs. Earlier, the Trump administration had imposed tariffs under the 1977 International Emergency Economic Powers Act (IEEPA).

India has strongly rejected allegations made by the USTR in the two investigations and has requested that the probes be initiated, as the initiation notice has failed to provide a cogent rationale to substantiate the claims.

“The advantage of signing a deal now is that even if India is found to violate Section 301, the additional tariff will not be imposed. The tariff will remain at the pre-negotiated level of 18%. For other countries in violation of Section 301 and without trade deals, tariffs will be much higher than the negotiated tariffs,” an official source aware of the US position told Business Standard.

Can the trade deal provide India relief from Section 301 investigations?

Ajay Srivastava, founder, Global Trade Research Initiative, told Business Standard that India should resist any pressure that the US inflicts using the prospect of Section 301 tariffs.

“The price India would pay under the proposed agreement — lower tariffs on US goods, regulatory concessions, digital trade commitments, alignment with US economic priorities, and a reported $500 billion purchase commitment— would far exceed the damage that any Section 301 tariffs could inflict,” Srivastava told the financial daily. He asserted that signing the trade agreement would not provide immunity from future US trade actions.

What can be expected from the trade deal?

The chief negotiators of the US and India have begun four-day talks in New Delhi.

The US team is being led by its chief negotiator Brendan Lynch, while India's chief negotiator is Darpan Jain, who is an additional secretary in the Department of Commerce.

The two sides are expected to iron out details of the interim trade agreement (signed in February) and negotiate on areas such as:

• market access,
• non-tariff measures,
• customs and trade facilitation,
• investment promotion, and
• economic security alignment.

According to the interim framework, the US had agreed to reduce tariffs on India to 18% from 50% — completely withdrawing the additional 25% tariffs levied on India for buying Russian oil.

But after the US Supreme Court struck down the reciprocal tariffs, imposed under the 1977 IEEPA powers, Trump announced the imposition of 10% tariffs on all countries for 150 days, starting February 24. The uniform tariff gives India a comparative advantage over its competitor countries, and the trade pact must be recalibrated accordingly.

What India agreed to in the interim trade deal?

Under the agreed interim framework, India proposed to eliminate or reduce tariffs on all US industrial goods and a wide range of US food and agricultural products, including dried distillers' grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products.

India also expressed its intentions to purchase $500 billion of US energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next five years.

The US was the second-largest trading partner of India in 2025-26. India's outbound shipments to the US grew marginally 0.92% to $87.3 billion during the last fiscal year, while imports increased 15.95% to $52.9 billion. The trade surplus declined to $34.4 billion in 2025-26 from $40.89 billion in 2024-25.