The US Trade Representative on Tuesday proposed a 12.5% tariff on exports from 54 countries, including India and China, accusing them of failing to prohibit the import of goods made with forced labour. The move was widely anticipated and comes as American officials are in India to discuss a framework agreement that Commerce and Industry Minister Piyush Goyal had said is close to finalization.
USTR investigation and next steps
The USTR is also expected to release its report on a second probe dealing with excess capacity in 16 countries, including India. This is seen as a move to replace the temporary 10% tariff in place until July 24. The agency has sought comments by July 6 and will hold hearings on July 7 before determining the final action.
India's response
In a statement, the commerce and industry ministry said: “India remains engaged with the US on the matter as a part of section 301 proceedings. India is also parallelly engaged with the US for finalisation of a framework agreement as was announced on 2nd Feb 2026 and in accordance with the joint statement released on 7th Feb 2026.” Government agencies and businesses had dismissed the allegations in their submissions to USTR, calling the probe unjustified and arguing that global rules already cover the issue.
Key export sectors at risk
The USTR report alleged evidence of forced labour in cotton and polysilicon supply chains in China, which were used by other countries under probe. It also said that steel, aluminium, automobiles and auto parts, electronics, and agriculture, often part of trans-shipment practices, are at risk of forced labour, impacting American goods. While India, the UK, China, Japan, Switzerland, Bangladesh, Sri Lanka, and Vietnam face 12.5% tariffs, six countries – the EU, Pakistan, Canada, Mexico, Indonesia, and Ecuador – face an additional 10% tariff.
Bilateral negotiations
Government officials, who have held multiple rounds of discussions with their American counterparts, were expecting the US to use section 301 to impose additional tariffs, a key policy lever for the Trump administration. The government has maintained that it will agree to a bilaterally negotiated rate if India gets a comparative advantage over rival countries.
