The United States has proposed imposing additional tariffs of up to 12.5% on imports from India and 59 other economies, citing their alleged failure to effectively prohibit and enforce bans on goods produced through forced labor.  The transfer comes as ongoing talks between New Delhi and Washington on a bilateral trade pact stall.

Key Highlights

• US proposes 12.5% tariffs on India, citing inadequate enforcement of forced labor import bans.
• Move comes amid ongoing India-US trade talks and could impact bilateral commerce.

The proposal is based on a determination by the Office of the United States Trade Representative (USTR) under Section 301 of the United States Trade Act of 1974. The agency determined the policies and practices of the economies in question are “unreasonable” and impose limits on US trade, thus complying with American law for trade action.

India has been included in the list of economies, which includes 54 countries that did not adequately implement or enforce restrictions on imports of goods allegedly made with forced labor. Other economies listed are China, Japan, Bangladesh, Australia, U.K., the U.A.E., Saudi Arabia, Singapore and Bahrain.

The report, announced by US Trade Representative Ambassador Jamieson Greer, "Impose an unfair competitive disadvantage on American workers and businesses because major trading partners have failed to take steps to reduce imports associated with forced labour. The investigation started in March 2026, with dozens of witnesses, and hundreds of public comments submitted to the agency leading to its findings."

Also Read: Canadian PM Mark Carney Says India-Canada FTA a "Game Changer"

Additional Duties and Public Consultation Process

Under the proposed framework, economies that have already implemented or pledged to implement import bans linked to forced labour could face an additional 10% tariff. Countries that have not adopted such measures may be subjected to a higher 12.5% duty. The USTR has also proposed a separate mechanism for textile and apparel imports, though detailed provisions are yet to be announced. Certain products, including energy commodities, pharmaceuticals, rare earth materials, aircraft parts, coffee, beef, and selected agricultural products, have been exempted from the proposed duties.

The agency has opened a public consultation process, with comments being accepted until July 6 and a public hearing scheduled for July 7 before any final decision is taken.

Impact on India-US Trade Relations

The development comes at a sensitive stage in India-US relations, with both countries actively negotiating the first phase of a bilateral trade agreement. Discussions in recent months have focused on market access, tariff reductions, digital trade regulations, and agricultural exports.

Despite recurring trade disputes, the United States remains India’s largest trading partner, with bilateral goods trade exceeding $120 billion in recent years. Both governments have repeatedly emphasized their commitment to strengthening economic ties and expanding commercial cooperation. The latest tariff proposal could add a new layer of complexity to ongoing negotiations if implemented.