USTR Eyes 12.5% Additional Duties on India Over Forced Labour

USTR proposes 12.5% additional duties on India and 53 other countries for failing to prohibit imports made with forced labour, and in a move that screams perfect diplomatic timing, Washington dropped this particular bombshell while its own trade delegation was sitting inside New Delhi, mid-negotiation, sipping chai.

The Office of the US Trade Representative proposed 12.5% additional duties on 54 countries, including India, for failing to prohibit the import of goods produced with forced labour. The action stems from a fresh Section 301 investigation initiated in March 2026 covering 60 economies that account for more than 99% of US imports. Because nothing says “let’s finalise a trade deal” quite like threatening your negotiating partner with new tariffs from the hotel lobby.

What Exactly Did Washington Find?

The USTR report concluded that India’s approach to imports linked to forced labour is actionable under Section 301 of the US Trade Act of 1974. The report stated that India has failed to impose and effectively enforce a prohibition on the import of forced labour. The findings further declared that the failure of the investigated economies to impose and effectively enforce forced labour import bans distorts global trade, creates unfair competitive advantages, and undermines efforts to eliminate forced labour from international supply chains.

The US didn’t stop at naming India. The 54 countries failing to impose and effectively enforce prohibitions include India, China, Japan, Brazil, Australia, the UK, and Saudi Arabia. So basically, if you trade with America and breathe, there’s a decent chance you made the list.

Not everyone got the harshest treatment, though. Six economies, Canada, Ecuador, the European Union, Indonesia, Mexico, and Pakistan, face a lower 10% duty because they have existing reciprocal trade agreements or partial forced labour regimes in place. These are the teacher’s pets. Everyone else gets the full 12.5%.

Jamieson Greer: America’s Most Enthusiastic Tariff Ambassador

USTR Ambassador Jamieson Greer has been on something of a roll lately. He said in a statement: “The failure of our most important trading partners to address the importation of goods made with forced labour is unacceptable. This creates a dynamic in which American workers are forced to compete globally on an uneven playing field. We will no longer tolerate this disparity.”

Nobody ever accused Greer of understatement. This is the same USTR that, as of mid-2025, had already imposed a cumulative 50% additional duty on Indian goods, a combination of a 25% reciprocal tariff and an additional 25% penalty for India’s continued purchase of Russian crude oil. And now, a fresh 12.5% is being served on top. At this rate, Indian exporters may need to start factoring in a “diplomatic chaos surcharge.”

The Textile Escape Hatch

To soften what is an otherwise blunt instrument, the USTR has also suggested a separate mechanism for textiles and apparel that would permit a specified volume of imports from selected economies to enter the US market at a lower Section 301 tariff rate. It’s a modest concession — the kind of fig leaf that lets both sides say they tried to be reasonable while the larger fight plays out over months.

A Firm No, and a Pointed Suggestion

New Delhi was not exactly in the mood to nod along. India denied the allegations under the forced labour clause and asked the US to end the investigations, saying such matters should be addressed within the framework of ongoing bilateral trade negotiations.

That framing is deliberate. India is keen on understanding the tariff being offered by the US after the US Supreme Court struck down the reciprocal tariffs, and Indian sources have indicated that the forced labour tariff rate as well as the Section 301 investigations will have to be discussed at the negotiating table.

This is a country that has, by all accounts, shown remarkable restraint in not retaliating to repeated US tariff volleys. India has so far refrained from retaliating against US tariff actions, opting instead to pursue negotiated outcomes. Whether that patience survives a 12.5% forced-labour tariff landing mid-handshake remains to be seen.

The Most Awkward Timing in Trade History

Here is the part that genuinely defies parody. The USTR report was released at a time when a US delegation led by Assistant USTR Brendan Lynch was visiting New Delhi from June 1 to 4 to continue discussions on finalising the interim Bilateral Trade Agreement. Both the US and India had indicated that the deal was almost finalised, with only the last leg of negotiations remaining.

So American officials landed in India to close what is essentially a near-done deal, and their own government simultaneously published a report calling India out for forced labour violations. The bilateral trade pact aims to more than double bilateral trade to $500 billion by 2030, from the current $191 billion. Someone in Washington clearly did not check the calendar.

Who Else Is in the Crosshairs?

It would be unfair to let this read as purely an Indian story. The list includes countries such as Australia, China, India, Israel, Japan, Qatar, and Russia, along with Saudi Arabia, Singapore, South Korea, Sri Lanka, Switzerland, Taiwan, Thailand, Turkey, UAE, and the United Kingdom. That is, in diplomatic terms, a substantial chunk of the planet. When you are in a tariff dispute with everyone from Japan to Sri Lanka to Switzerland simultaneously, it may be worth asking whether the problem is global noncompliance — or an increasingly aggressive trade enforcement posture.

What Happens Next

The public comment and hearing process running through July allows India’s government and industry bodies to contest the forced labour findings before the USTR and potentially influence the final tariff determination. India is also expected to submit further formal comments opposing the findings as bilateral negotiations continue.

Whether Washington ultimately imposes the full 12.5% or whether the ongoing bilateral trade agreement absorbs or neutralises this particular threat will depend on how the next few weeks of diplomacy go. For now, both sides are nominally still talking. Given that the US delegation dropped by for tea while this report was going live, that may be the most polite standoff in modern trade history.