The United States and India may be 99% closer to finalizing a bilateral trade agreement (BTA), but Washington's latest proposal indicates that the trade story is far from over. The United States Trade Representative (USTR) on Wednesday named India among countries that could face additional tariffs over concerns regarding the prevention of goods linked to forced labour from entering global supply chains.
Background of the Proposal
The proposal follows one of 60 investigations conducted under Section 301 of the US Trade Act of 1974. Based on its findings, the USTR has suggested imposing additional duties of 10% to 12.5% on imports from affected economies. This move comes at a sensitive time, as senior officials from India and the United States are currently engaged in a three-day round of trade talks in New Delhi. While both countries have been working towards a bilateral trade agreement, the latest proposal has introduced another hurdle to their ongoing trade negotiations.
Why India Is on the List
The USTR, in its reports, stated: "In sections III.A.7 and III.B.7, USTR found that India has failed to impose and effectively enforce a forced labor import prohibition." India is among 54 economies that, according to the USTR, have not imposed or effectively enforced a ban on importing goods produced with forced labour. The report added that "the acts, policies, and practices of India related to the failure to impose and effectively enforce a forced labor import prohibition are unreasonable and burden or restrict US commerce."
The investigation, launched by the USTR in March 2026, covered economies accounting for 99.4% of US imports and examined whether these countries allow goods produced with forced labour to enter global supply chains. The probe focused on two scenarios: where forced labour is used directly in the production process, and where countries import inputs allegedly made with forced labour from elsewhere and use them in goods subsequently exported to the United States.
According to the think tank Global Trade Research Initiative (GTRI), the focus was on products using imported inputs from China that are suspected of being produced with forced labour. If such inputs are used in goods exported from India to the United States, those shipments could come under investigation. For example, India's solar panel exports to the US often rely on imported polysilicon or solar cells sourced from Chinese supply chains that have faced scrutiny over alleged forced labour in Xinjiang. Similarly, electronics manufacturing in India depends heavily on Chinese components, cables, and sub-assemblies, which could be examined if they originate from regions linked to labour-transfer programmes. In the textile and garment sector, Indian manufacturers frequently use Chinese yarns and fabrics, which could face tighter traceability requirements if linked to cotton produced in Xinjiang.
India prohibits forced labour under the Bonded Labour System (Abolition) Act, 1976. However, exporters may still come under scrutiny because many industries depend on imported intermediate goods from China. GTRI noted in its earlier report: "India prohibits forced labour under the Bonded Labour System (Abolition) Act, 1976, but it could still face investigations because many Indian export industries rely on imported intermediate inputs from China."
What the USTR Has Proposed
According to a USTR notification, countries that already prohibit imports linked to forced labour, have committed to introducing such measures under a reciprocal trade arrangement, or maintain a partial framework restricting the entry of certain goods produced through forced labour, would face an additional tariff of 10%. For countries that do not meet these conditions, the proposed additional tariff has been set at 12.5%. The agency has also proposed a separate mechanism for textiles and apparel that would allow a specified volume of imports from selected economies to enter the US market at a lower Section 301 tariff rate.
In announcing the findings, the USTR said it intends to pursue responsive trade actions based on the results of the investigations. Ambassador Jamieson Greer was quoted as saying: "The failure of our most important trading partners to address the importation of goods made with forced labor is unacceptable. This creates a dynamic where American workers are forced to compete globally on an unlevel playing field."
Understanding Section 301
Section 301 is a provision of the US Trade Act of 1974 that authorizes the USTR to investigate the trade policies, practices, and actions of foreign governments. The purpose is to determine whether those measures are unfair, discriminatory, or place an unreasonable burden on US trade and commercial interests. If an investigation finds that a country has engaged in practices considered harmful to US commerce, the provision allows the US administration to take corrective action. These measures can include higher tariffs, trade restrictions, or other remedies aimed at addressing the concerns identified during the investigation.
