The Centre on Saturday said the United States had placed India in the lower 10 per cent tariff bracket under its Section 301 measures concerning alleged forced labour issues, describing the decision as a relative advantage for Indian exports. The government also reiterated its commitment to concluding the India-US Bilateral Trade Agreement (BTA) at the earliest.
On July 23, the Office of the United States Trade Representative (USTR) announced the final measures under Section 301 of the US Trade Act, 1974, imposing an additional 10 per cent import duty on Indian goods from July 24. The decision followed a USTR investigation into the policies and practices of 60 economies, including India, regarding the prohibition and enforcement of imports made using forced labour.
The US had initially proposed a 12.5 per cent tariff on Indian goods. However, the final duty was reduced to 10 per cent, replacing the temporary 10 per cent tariffs that had been in force for 150 days since February 24.
Reacting to the announcement, the Commerce Ministry said India had remained actively engaged with the USTR throughout the investigation through written submissions, in-person consultations and participation in public hearings.
"As a result of these sustained efforts, India has been placed in the lower tier of additional tariffs under the final measures, providing a relative advantage to Indian exports in key sectors," the ministry said.
The ministry noted that a significant portion of India's exports to the US, worth $87.31 billion in 2025-26, would remain exempt from the additional 10 per cent duty. These include generic pharmaceuticals, smartphones and several other specified products that currently attract zero additional tariffs.
It also clarified that products already covered under Section 232 measures—including steel, aluminium and auto parts—would not be subject to the additional 10 per cent duty under Section 301. According to think tank GTRI, these goods account for around 8 per cent of India's exports and are already subject to tariffs of 25 per cent or 50 per cent, in addition to the standard US Most Favoured Nation (MFN) duty. Section 232 duties apply to most countries, with only limited exceptions.
"On account of these exemptions, an estimated 45 per cent of India's exports to the US remain outside the purview of the additional 10 per cent Section 301 duty," the ministry said.
The remaining 55 per cent of exports will face the additional 10 per cent levy. However, the government maintained that India's overall tariff burden remains lower than that imposed on most other economies covered by the investigation.
"The government remains committed to working with the US towards the early conclusion of the India-US Bilateral Trade Agreement, as announced on 2 February 2026 and in accordance with the Joint Statement issued on 7 February 2026," the ministry added.
Textile industry flags concerns
Responding to concerns raised by the textile sector, the Commerce Ministry said the textile-specific mechanism referred to in the final Section 301 measures has not yet been established or implemented. It added that India continues to discuss the issue with the US as part of the ongoing BTA negotiations.
Industry representatives have pointed out that India has not been granted the textile and apparel tariff-rate quota (TRQ) exemption under the new US Section 301 tariff framework linked to forced labour.
The exemption covers specified export volumes from Bangladesh, Cambodia, Indonesia and Malaysia that use US-origin cotton and fibre. According to the USTR, these textile TRQs will remain in place for an initial period of three years.
Under the arrangement, manufacturers in these countries can import US cotton and textile inputs, produce finished goods and export them to the US at concessional duty rates.
Bangladesh, one of India's biggest competitors in textile exports, imports substantial quantities of Indian cotton and fibre. However, the new TRQ mechanism could encourage Bangladeshi manufacturers to source more raw material directly from the US instead.
The Confederation of Indian Textile Industry (CITI) expressed concern that the additional US tariff could also hurt India's exports of intermediate textile products to other countries.
The US remains the largest market for Indian textile and apparel exports, with annual shipments typically valued at around $11 billion.
Earlier this year, Commerce and Industry Minister Piyush Goyal had expressed confidence that India would secure concessional duty access for garments manufactured using American yarn and cotton under the proposed trade agreement, similar to the benefits currently available to Bangladesh.
What the additional 10% tariff means
The new 10 per cent duty is imposed over and above the existing import tariff, or MFN duty, applicable to products entering the US.
For instance, if an Indian-made shirt currently attracts a 5 per cent import duty in the US, it will now face a combined tariff of 15 per cent after the additional 10 per cent levy.
Why India was placed in the 10% tariff bracket
The USTR launched two Section 301 investigations in March against several countries, including India, focusing on issues related to forced labour and excess industrial capacity.
In June, the US proposed a 12.5 per cent tariff on 54 countries, including India, for allegedly failing to prevent imports of goods produced using forced labour. A lower 10 per cent tariff was proposed for six regions, including Pakistan and the European Union.
In July, India amended its Foreign Trade Policy to prohibit imports of goods made using forced labour. The US acknowledged this policy change before placing India in the lower 10 per cent tariff category.
Probe into excess industrial capacity still pending
The US has yet to announce the findings of its separate Section 301 investigation into excess industrial capacity.
According to GTRI, the Trump administration is expected to release the outcome of that probe soon, which could lead to additional tariffs on a broad range of industrial products.
India-US trade talks continue
India and the US are continuing negotiations on a bilateral trade agreement and have already finalised a framework for the first phase of the deal.
As discussions progress, India is seeking greater tariff advantages over competing countries to strengthen its export competitiveness in the US market.
