By putting a ban on import of goods produced using forced labour, India has managed to reduce the additional tariffs that the US had proposed to impose on its exports to 10% from 12.5%. This gives the country a tariff advantage over competitors like China, Vietnam, Thailand, and Türkiye, which will be charged 12.5%.
“This has helped India secure a relatively favourable position compared to many of its global competitors,” said S. C. Ralhan, President of the Federation of Indian Export Organisations (FIEO).
Early Friday, the US announced additional tariffs on 60 economies for their failure to impose and effectively enforce a prohibition on the importation of goods produced with forced labour. Countries that have prohibited imports of goods produced labour would be charged 10% additional tariffs. These additional tariffs came even as India and the US are engaged in intensive negotiations on a trade deal.
India, which imposed the prohibition through a notification on July 13, is among 17 countries including Bangladesh, Pakistan, Sri Lanka, Indonesia, Malaysia and the United Kingdom with lower tariffs. “Consequently, Indian exporters largely retain their relative competitiveness against Bangladesh, Cambodia, Pakistan, Sri Lanka, Indonesia and Malaysia in labour intensive sectors like textile, garments, leather and footwear,” said the FIEO President.
For the European Union, Taiwan, Japan, Korea, and Switzerland the additional tariffs are on a net basis. This means that combined tariffs for these economies will be at the prescribed level rather than stacking the full duty on top of existing MFN tariffs. The rest will be charged 12.5% extra.
Breakdown of Section 301 Tariffs
“About 70% of India’s exports to the U.S. will now pay MFN tariffs plus a 10% Section 301 duty, while Section 232 products including steel, aluminium, copper, and auto components will continue to face 25%-50% tariffs,” said Ajay Srivastava, founder of Global Trade Research Initiative (GTRI). .
The tariffs imposed under Section 301 of the Trade Act replace existing 10% additional duties under Section 122 of the Trade Act that expire on Friday. The Section tariffs were imposed when the US Supreme Court invalidated the country-specific tariffs imposed through an executive order. While Section 122 tariffs could be imposed only for 150 days, Section 301 tariffs are permanent unless reviewed by the US Administration.
The investigation for import of products made with forced labour which hurt American commerce was launched on March 12 under Section 301. It covered 60 trade partners of the US that account for 99.4% of its imports. The report of the investigation came on June 2, which recommended tariffs ranging from 10%-12.5% on all 60 economies. Following public hearings and consultation, the US Trade Representative Jamieson Greer published the final findings confirming the tariffs.
Excess Capacity Probe
Other than the forced labour issues, the Office of the USTR is conducting another investigation on policies of India, China, EU, Singapore, Switzerland, Japan and nine other economies that enable excess manufacturing capacities and end up hurting American businesses. This investigation could lead to additional tariffs.
The forced labour tariffs exempt raw materials and agricultural inputs that the United States cannot produce in sufficient quantities, products whose taxation could cause inflation or supply disruptions, selected industrial inputs including certain plastic resins, medical supplies and metal products.
