New US Trade Proposal Could Impact Indian Exports: What We Know

India could face new trade pressure from Washington after the Office of the United States Trade Representative (USTR) proposed an additional 12.5% tariff on imports from countries that it says have failed to adequately prohibit or enforce restrictions on goods made with forced labor.

The proposal is not yet final, but it has emerged at a sensitive moment as Indian and U.S. officials continue negotiations on a bilateral trade agreement.

The measure is part of a sweeping Section 301 investigation covering 60 economies, including China, Japan, South Korea, the United Kingdom, Vietnam and India. USTR concluded that the affected countries’ policies regarding forced-labor-linked imports are “unreasonable” and burden U.S. commerce.

Why India Has Been Targeted

According to USTR’s findings, India is among 54 economies that allegedly have not imposed and effectively enforced a prohibition on imports of goods produced using forced labor. As a result, India falls into the higher tariff category under the proposal.

The USTR argues that countries without effective import restrictions allow forced-labor goods to enter global supply chains at lower costs, creating unfair competition for companies operating under stricter labor standards. U.S. Trade Representative Jamieson Greer said the failure of major trading partners to address such imports creates “an unlevel playing field” for American workers.

A Two-Tier Penalty Structure

According to the proposal, countries lacking forced labor import bans face a 12.5% blanket duty on their products. Countries with partial restrictions or reciprocal trade commitments face a slightly lower 10% levy. The USTR has also proposed a specialized quota mechanism to ease the tariff burden on certain textile and apparel imports.

The six countries with existing but inadequately enforced prohibitions are Canada, Ecuador, the European Union, Indonesia, Mexico and Pakistan ,these countries were identified and placed in the lower 10% tariff section.

Washington’s Take

“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,” said USTR Ambassador Jamieson Greer while announcing the proposal.

The investigation was initiated in March 2026 and covered countries from which 99.4% of US imports originate. The report says that the absence of forced labor import bans distorts global trade, creates unfair competitive advantages, and undermines efforts to eliminate forced labor from international supply chains.

India’s Response and Ongoing Trade Talks

India has a relation with the US on the Section 301 investigations over forced labor concerns and is also engaged in parallel with the US for finalization of an interim trade agreement, a framework for which was announced through a joint statement on February 7 2026.

The new proposed tariffs are mostly to impact the final system of any bilateral trade agreement, as India has mentioned that such a deal will be accepted only if the terms gives New Delhi a competitive advantage in its exports to the US.

USTR will hold hearings on the proposed actions on July 7, 2026. Interested parties are invited to submit requests to appear at the hearing by June 22. Written public comments are due by July 6, 2026. The proposed tariffs will not be effective until this process ends and a final determination is made.