The Office of the US Trade Representative finalized Section 301 tariffs on 60 economies on July 23 over their failure to ban forced-labor imports. The action places India in the lower 10% duty tier and exempts an estimated 45% of its exports, India's Ministry of Commerce and Industry said.
Key Facts
- Down from the 12.5% initially proposed in June, India's new Section 301 duty settled at 10%.
- The exemption covers 45% of India's US-bound exports, leaving the other 55% newly taxable.
- Textile inputs like polyester staple fiber could stack past 30%.
The action closes out an investigation Ambassador Jamieson Greer opened in March. President Trump had directed USTR to examine whether 60 trading partners were letting forced-labor-made goods into the US market.
USTR received more than 2,100 public comments and ran four rounds of hearings before settling the final rates last week. Greer framed the action as overdue. He called it a correction to both a human rights abuse and a distortive trade practice affecting workers worldwide.
India's June Forced-Labor Ban Led to a Lower Tariff Rate
USTR had initially proposed a 12.5% duty for India in June before lowering it to 10% this month. The agency's final investigation report tied the cut directly to India's own policy shift. It cited India's adoption of a forced labour import prohibition after its June 5 proposal.
India's Commerce Ministry credited its own diplomacy for the result too. "The Government of India remained closely engaged with USTR throughout the investigation," the ministry noted. Seventeen economies, including Canada, Mexico, the United Kingdom and Bangladesh, landed in the same 10% tier as India.
The rest of USTR's 60-country list faces a 12.5% rate instead.
Pharma, Smartphones and Steel Remain Exempt from the New Duty
USTR's fact sheet lists three categories of product exemptions built into the final rule: raw materials that could disrupt US supply if taxed, goods the US can't source elsewhere, and products already under separate Section 232 tariffs.
The Section 232 category matters most for India. India's exempt list covers:
- Steel, already excluded under separate Section 232 tariffs
- Aluminum, already excluded under separate Section 232 tariffs
- Auto parts, already excluded under separate Section 232 tariffs
- Generic pharmaceuticals, added by India's Commerce Ministry to the exempt list
- Smartphones, added by India's Commerce Ministry to the exempt list
Pharmaceuticals and smartphones are two of India's largest US export categories by value. Taken together, the ministry estimates these exemptions shield 45% of India's exports from the new duty.
The remaining 55% becomes taxable for the first time.
India's Commerce Ministry added generic pharmaceuticals and smartphones to its own exempt list. Steel, aluminum and auto parts were already excluded through separate Section 232 tariffs.
India's Textile Duty Question Remains Unresolved
The 55% facing the new duty won't stop at 10%. India already carries an 18% reciprocal tariff into the US under the bilateral trade framework announced in February.
Commerce Minister Piyush Goyal put the reciprocal rate at 18% at the time, down from 50%. Add the new 10% Section 301 duty on top, and non-exempt Indian goods face a combined 28% into the US.
The 28% total isn't new. It mirrors what those same goods carried under the outgoing Section 122 baseline, a separate 10% global surcharge that expired the same day this action took effect.
The exemption list changed. The top-line rate didn't. Section 122 had spared oil, gas, fertilizer and USMCA-linked goods; the new rule spares India's pharmaceuticals and smartphones instead.
Reliance Industries and the Agricultural and Processed Food Products Export Development Authority (APEDA) went further in submissions cited by Business Standard. They warned that duties on specific textile inputs, like polyester staple fiber and PET resin, could stack to 30-40%.
Textile-focused relief was supposed to soften that exposure. USTR's final measures reference a sector-specific mechanism for textiles, but India's Commerce Ministry reported that mechanism has not yet been set up or put into effect. Per the ministry, India will keep raising the issue in ongoing talks toward a bilateral trade agreement with the US.
Not everyone accepts the premise behind the tariff. Ajay Srivastava, founder of the Delhi-based Global Trade Research Initiative, said the duty "lacks a credible factual basis."
He argued the US has not shown that India imports goods made with forced labor.
