US Finalises 10% Tariff on India Under Section 301, Down from 12.5% Proposal

The United States has imposed a 10% tariff on goods imported from India, citing concerns over forced labour. This rate is lower than the 12.5% duty originally proposed in March under Section 301 of the Trade Act of 1974. The decision, effective from Friday, comes weeks after India's Directorate General of Foreign Trade explicitly banned imports of goods produced using forced labour.

Under the new tariff structure, India falls into a second-tier group of 17 economies—including Argentina, Bangladesh, Canada, Indonesia, Malaysia, Pakistan, and the United Kingdom—that face a standard 10% Section 301 tariff. In contrast, the European Union and Taiwan receive the most favourable treatment: their Section 301 tariff applies only if the product's existing Most Favoured Nation (MFN) tariff is below 10%. If the MFN rate is 10% or higher, the additional duty is zero.

The USTR noted that India's adoption of a forced labour import prohibition after the June 2026 Federal Register Notice contributed to the reduction from the proposed 12.5% to 10%. The agency stated, 'Based on the findings in the investigation of India, including India's adoption of a forced labor import prohibition subsequent to the publication of the June 5, 2026 FRN... the Trade Representative has determined to impose 10% tariffs on products of India.'

India's 10% rate matches those for Association of Southeast Asian Nations (ASEAN) members like Malaysia and Indonesia. However, Vietnam, China, Russia, Brazil, Australia, the Philippines, Türkiye, and Saudi Arabia face a higher 12.5% tariff—the least favourable tier. Japan, South Korea, and Switzerland are subject to a 12.5% rate net of MFN, but with a mechanism similar to the EU: the total duty (MFN plus Section 301) is capped at 12.5%, and if the MFN rate already equals or exceeds 12.5%, the Section 301 duty is zero.

Separately, the USTR established textile tariff-rate quotas (TRQs) for Bangladesh, Cambodia, Indonesia, and Malaysia. These TRQs allow a specific volume of textiles and apparel from these countries to enter the US free of Section 301 tariffs for an initial three-year period, after which a 10% duty applies. India was not granted a similar TRQ. This could affect India's textile exports, as Bangladesh—a major competitor and importer of Indian cotton and fibre—may now source inputs from the US instead.

Textile and apparel goods from Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua are also exempt from Section 301 tariffs if they enter duty-free under the Dominican Republic-Central America FTA (CAFTA-DR).

Certain goods are fully exempt from the additional tariffs, including aircraft (other than military), engines, ground flight simulators, and their parts. Agricultural exemptions include some animal products for feed, seeds for planting, vegetable products like coconut coir and jute burlap, unflavored instant coffee, and in-quota sugar products.