Can US impose additional tariffs on India for ‘overcapacity, forced labour’? Explanation of investigation under Section 301 | Today’s news
As India and the US begin finalizing a long-term trade deal in Delhi from June 1 to June 4, key industries are eagerly awaiting any announcements on US tariffs on Indian imports.
According to a report in Business Standard, the US has assured India that it will not impose any additional tariffs under Section 301 of the US Trade Act of 1974 if the two countries sign an agreement before July 24, when the current 10% base tariff is set to expire.
A basic 10% tariff was temporarily applied to all US trading partners for 90 days after the US Supreme Court struck down reciprocal tariffs imposed by President Donald Trump in February, calling them “unconstitutional”.
What is Section 301?
Section 301 of the US Trade Act of 1974 is used by the US government to combat unfair trade practices of foreign countries.
It allows the executive branch of the Office of the United States Trade Representative (USTR) to investigate foreign governments and retaliate — primarily by imposing unilateral tariffs — if those governments harm American trade.
ÚSTR can sue foreign governments if it finds that their business practices violate international agreements, discriminate, or burden American companies. Other triggers include:
- theft of intellectual property,
- forced technology transfers,
- systemic violation of labor rights,
- market access restrictions and
- industrial subsidies that create a massive oversupply.
Read also | India-US trade deal likely to happen after USTR investigation completes: Report
Why is the US investigating India?
In March of this year, the US launched a Section 301 investigation against its trading partners – including India, China, Japan and the EU – over allegations of overcapacity in manufacturing and the use of forced labor in global supply chains.
The investigations were widely seen as Trump’s alternative to imposing tariffs under another law and compensating for lost revenue after the U.S. Supreme Court struck down reciprocating tariffs. The Trump administration has previously imposed tariffs under the International Emergency Economic Powers Act (IEEPA) of 1977.
India strongly rejected the allegations made by the ÚSTR in both investigations and requested the initiation of the investigation as the notification of initiation did not provide a convincing rationale to substantiate the allegations.
“The advantage of signing the agreement now is that even if India is found to be in violation of Section 301, no additional duty will be imposed. The duty will remain at the pre-negotiated level of 18%. For other countries that are in violation of Section 301 and without trade agreements, the tariffs will be much higher than the negotiated tariffs,” an official source familiar with the US position told Business Standard.
Can a trade agreement grant India immunity from Section 301 investigation?
Ajay Srivastava, founder of the Global Trade Research Initiative, told Business Standard that India should resist any pressure from the US using the prospect of Section 301 tariffs.
“The price India would pay under the proposed deal — lower tariffs on US goods, regulatory relief, digital trade commitments, alignment with US economic priorities and a reported $500 billion purchase commitment — would far outweigh the damage any Section 301 tariffs could cause,” Srivastava told the financial daily. He argued that signing the trade deal would not provide immunity from future US trade actions.
What can be expected from the trade agreement?
The chief negotiators of the US and India began four days of talks in New Delhi.
The US team is led by its chief negotiator Brendan Lynch, while India’s chief negotiator is Darpan Jain, who is the additional secretary of the Department of Commerce.
The two sides are expected to finalize the details of the interim trade agreement (signed in February) and negotiate on areas such as:
- market access,
- non-tariff measures,
- customs and trade facilitation,
- investment support a
- reconciliation of economic security.
Under the Interim Framework, the US agreed to cut tariffs on India to 18% from 50% – completely withdrawing the additional 25% tariffs imposed on India for buying Russian oil.
But after the US Supreme Court struck down reciprocal tariffs imposed under the IEEPA’s 1977 powers, Trump announced 10% tariffs on all countries for 150 days, starting on February 24. A single tariff gives India a comparative advantage over its competing countries and the trade pact needs to be recalibrated accordingly.
Read also | Trump to impose 25% tariffs on EU cars and trucks for violating trade deals
What did India agree to in the Interim Trade Agreement?
Under the Agreed Interim Framework, India proposed to eliminate or reduce tariffs on all US manufactured goods and a wide range of US food and agricultural products, including distillers’ dried grains (DDG), red sorghum for animal feed, nuts, fresh and processed fruits, soybean oil, wine and spirits, and other products.
India has also expressed its intention to buy $500 billion worth of US energy products, aircraft and aircraft parts, precious metals, technology products and coking coal over the next five years.
The US was India’s second largest trading partner in 2025-26. India’s outbound shipments to the US rose marginally by 0.92% to $87.3 billion during the last fiscal year, while imports grew by 15.95% to $52.9 billion. The trade surplus has narrowed to $34.4 billion in 2025–26 from $40.89 billion in 2024–25.
Read also | US, India seek $500 billion in trade amid ‘maximum pressure’ on Russia: Jacob Helberg
