The US on Wednesday proposed to impose fresh tariffs of on India and 59 other trading partners including the UK, European Union, China and Japan, citing what it called their failure in prohibiting imports of goods produced with forced labour. While India and most of the others potentially face a tariff of 12.5%, a small set with relatively stricter curbs may still have to pay 10%.
The United States Trade Representative (USTR) said the acts, policies, and practices of these economies related to the "failure to impose and effectively enforce a prohibition on the importation of goods produced with forced labour." When such practices are unreasonable and burdens or restricts US commerce, they are actionable under Section 301(b) of the Trade Act, the USTR said in a statement.
Section 301 is a provision in the US Trade Act of 1974 that gives the US government authority to investigate and respond to foreign trade practices that are considered unfair or violate trade agreements. To be sure, the new tariffs are proposed on a range of countries, some of which already have free trade agreements with the US, like Canada, Mexico and Australia.
For India, the financial impact of the new tariffs is multi-dimensional. In the near term, exporters in highly labour-intensive domestic industries, such as textiles, garments, carpets, leather products, and brassware, could face the additional levy, significantly raising their tariff exposure.
While those who have taken specific steps will attract a 10% tariff, others, including India, will be levied 12.5%, the USTR said. The USTR also proposed a special mechanism that would allow for a certain volume of apparel and textile imports from certain economies to enter the US at a lower reduced tariff rate.
New Delhi remains engaged with US on the latest tariff proposal, the Union commerce ministry said in a statement. According to the ministry, products covered under Section 232 tariffs and certain other products are excluded from the latest tariff proposals. The ministry also drew attention to the special low-tariff mechanism proposed for textile and apparel products.
The proposal to levy tariffs based on alleged forced labour comes months after the US Supreme Court struck down President Donald Trump's reciprocal tariffs, which prompted the US administration to impose a 10% temporary tariff on all trading partners. That tariff expires on 24 July.
Agneshwar Sen, trade policy leader, EY India, said, “The US administration has been under increasing pressure to find an alternative to the 10% tariff introduced under Section 122 of the Trade Act on balance-of-payments grounds. That justification has been viewed as legally fragile by the US Court of International Trade and potentially inconsistent with WTO norms. In this context, the ‘forced labour’ approach provides a comparatively stronger legal basis to sustain, or even raise, equivalent tariff levels.”
The commerce ministry emphasized that the tariffs are not yet final. According to the USTR, stakeholders may submit requests to participate in public hearings by 22 June an send written comments by 6 July. Public hearings will be held on 7 July. The USTR will consider the comments and testimony received before taking a final decision on the proposed measures. The ministry added that "India is also parallelly engaged with the US for finalization of a framework agreement as was announced on 2 February 2026, and in accordance with the joint statement released on 7 February 2026."
USTR ambassador Jamieson Greer termed the alleged failure to address imports of goods made with forced labour as "unacceptable,", which creates a dynamic where US workers are forced to compete globally on an unlevel playing field. “We will no longer tolerate this disparity. Some trading partners have taken initial steps to prevent the importation of forced labor goods, including through USMCA and commitments in Agreements on Reciprocal Trade. However, each of our trading partners must do more to ensure that trade does not perversely encourage and entrench forced labour globally,” Greer said.
Separately, India and the US have resolved 99% of the issues holding up an interim trade agreement and are likely to finalize the deal within weeks, US Ambassador to India Sergio Gor said on Wednesday. “We’re very hopeful that the deal will get accomplished over the next weeks, several weeks. But it’s not going to be years. We’re very close to getting that done,” Gor said in response to a question at Citi’s 2026 India Conference in Mumbai.
Responding to a question on US tariff actions, Gor said the measures were not targeted specifically at India and had been applied globally. He added that the proposed trade arrangement placed India in a more favourable position than many regional peers.
“India should, therefore, submit detailed written representations by 6 July and participate proactively in the 7 July public hearing to challenge these conclusions. The current Section 122 tariffs are set to lapse on 24 July, which is a hard deadline before which a solution must be found,” Sen of EY India added.
Meanwhile, China hit back at any suggestion it uses forced labour and said trade issues with the US should be sorted out in talks. “So-called forced labour does not exist in China, and we oppose using this as a pretext for political manipulation,” foreign ministry spokesperson Mao Ning said.
“Any tariffs on Australian exports to the US are unjustified and inconsistent with our free trade agreement,” Australia’s trade ministry said.
“It’s very impactful because Section 301 is an extremely powerful tool, and it’s unlikely to be overturned,” Deborah Elms, head of trade policy at the Hinrich Foundation in Singapore, told Bloomberg. “In the hands of an administration determined to cause mischief, you’ve opened a door now for a whole lot of new tariff and non-tariff adjustments.”