The US government has proposed an additional tariff of 12.5% on India, even as its trade negotiators are in Delhi for negotiations with their counterparts. The recommendation came from the Office of the US Trade Representative following an investigation into “forced labour” practices in various countries. Most US trading partners would face a 10% levy under the proposal, while India and 53 other nations (including China, Japan, South Korea, Brazil and Switzerland) face a higher tariff rate.
“For economies that impose a forced labor import prohibition, that have committed to impose and enforce such a prohibition through an Agreement on Reciprocal Trade, or economies that have imposed a partial regime with the effect of preventing the importation of certain forced labor goods, the U.S. Trade Representative proposes 10% as the rate of additional duties. For all other economies, the U.S. Trade Representative proposes 12.5% as the rate of additional duty,” USTR wrote in a statement.
US President Donald Trump had announced a baseline 10% levy for all countries after the Supreme Court struck down his sweeping ‘reciprocal tariffs’ earlier this year. The figure was changed to a negotiated cumulative rate of 18% for India under the February 2026 interim framework.
The Trump administration had launched investigations under Section 301 of the Trade Act of 1974 after the court order — probing ‘unfair’ trade practices against several trading partners, including India, while imposing a blanket 10% tariff. There is growing apprehension that the ongoing probe could lead to additional tariffs that would stack on top of the global rates.
How will it impact Indian businesses?
The proposal has not been implemented, and there has been no official change at this time. USTR has invited public comments and outlined plans to hold hearings later this month — with a formal decision likely in the coming weeks. As such, there is no direct or immediate impact from this 12.5% additional tariff.
It is also pertinent to note that India is currently holding extensive negotiations for a trade deal with the United States. An American delegation is currently in New Delhi to iron out the “commas and full stops” and the Section 301 probe remains in focus. Union Minister Piyush Goyal also indicated on Monday evening that “all the major points have been settled” following the interim announcement in early February.
According to a Reuters report quoting sources, New Delhi is likely to discuss the ongoing Section 301 investigation and potential tariff measures with US trade officials.
“India has to discuss the tariff rate, 301 probe impact, and aim for a competitive tariff rate versus direct competition…the deal can be agreed if we get the terms fair, equitable, and balanced,” an Indian government source told Reuters on Tuesday.
“While finalising, how will the legal changes that have taken place in the US be reflected in the final agreement, and what kind of changes will be made accordingly. After finalising that, I am fully confident that, with the US, we will conclude the first tranche of the BTA as soon as possible, sign it and start further discussions on how to have a more comprehensive BTA,” Goyal added on Monday night.