US Hits India with New Tariffs Amid Forced Labor Probe; Trade Deal Hangs in Balance

The United States has slapped India with a new 10 percent additional tariff under its Section 301 measures, citing concerns over alleged forced labor practices, effective July 24, 2026. This move, while placing India in a lower tariff bracket than initially proposed, casts a new shadow over the ongoing negotiations for a crucial Bilateral Trade Agreement (BTA) between the two economic giants. Despite the tariffs, New Delhi has swiftly reaffirmed its commitment to finalizing the BTA, signaling a desire to navigate this trade friction. This latest action by the United States Trade Representative (USTR) follows an extensive investigation into forced labor practices across 60 economies, replacing temporary Section 122 tariffs that expired on the same day. India secured the relatively lower 10 percent duty – down from an initial 12.5 percent – largely due to its recent amendment of the Foreign Trade Policy to prohibit imports of goods made with forced labor. While key Indian exports like generic pharmaceuticals and smartphones are exempt from this new Section 301 tariff, the textile and apparel sectors are bracing for potential headwinds. Adding another layer of complexity, President Donald Trump also recently unveiled a separate, multi-phase tariff regime specifically targeting imported generic medicines, proposing duties of up to 200 percent by 2028 in a bid to push manufacturing back to the US. Going forward, the focus will remain squarely on the delicate balancing act between addressing US labor concerns and advancing the BTA. India Ministry of Commerce and Industry is continuing its engagement with the USTR, hoping to mitigate the impact of these tariffs and secure an early conclusion to the trade pact. The operationalization of Tariff Rate Quotas for some textile-producing nations, which India is not currently part of, will also be closely watched for its competitive implications. The coming months will reveal if the ongoing dialogue can successfully bridge these differences or if trade tensions will further complicate the India-US economic relationship.