The US administration under Donald Trump has begun its efforts to reconstruct its International Emergency Economic Powers Act (IEEPA) tariffs that were declared illegal by the US Supreme Court in February.
Starting Friday, the administration began imposing new tariffs under Section 301 of the US Trade Act of 1974 on the grounds that the 60 countries it targets — all major exporters to the US — have failed to take measures to stop imports of goods manufactured through forced labour.
According to the USTR, countries that import goods made by forced labour get an artificial cost advantage, forcing American workers to compete on an uneven playing field.
The main target, however, is clear: China. These tariffs are largely meant to force countries to cut their dependence on China, which the US is in a trade war with. The US State department maintains that the Chinese government uses forced prison labour to produce goods in Xinjiang province and injects them into international supply chains, “spreading China’s forced labor complicity around the globe”.
The new US architecture is yet to fully take shape. Only the first set of tariffs has been imposed, and multiple other Section 301 tariff investigations are still ongoing.
A timeline of US tariff actions, compiled in an Indian Council for Research on International Economic Research report released in July.saura
India, as of now, faces 10% tariffs, down from the 12.5% when the United States Trade Representative (USTR) first proposed the tariffs in March. The Trump administration is expected to announce the results of another Section 301 investigation, this one focusing on excess manufacturing capacity.
The lower rates for Indian goods come with New Delhi engaging in negotiations with the US for over a year, stepping up energy imports from Washington and lowering duty for some US goods.
On June 14, India also amended its foreign trade policy to explicitly ban the import of goods produced using forced labour. The USTR considered this a policy improvement, placing India in the lower-tariff category alongside 16 other economies.
India in second most favourable grouping
The USTR’s stated reason for imposing the new Section 301 tariffs is the import of goods made by forced labour.
But the four-tier tariff structure — ostensibly bracketing countries based on their measures to curb imports of forced labour goods — suggests that they were imposed along geopolitical lines. All 60 countries under investigation were found guilty — the most favoured countries or groupings remain the European Union (EU) and Taiwan, and the most unfavourable Vietnam and China.
The US classification of countries under Section 301 tariffs.
The USTR explained that for a product of the EU or Taiwan, where the product’s most favoured nation (MFN) tariff is less than 10%, the US shall impose a Section 301 tariff in a way that the sum of the MFN tariff and the Section 301 tariff shall be 10%. In cases where a product’s MFN tariff is greater than or equal to 10%, the section 301 tariff would not be imposed.
In trade parlance, MFN rates are duties that countries use across the board for all countries. As per World Trade Organisation (WTO) norms, MFN rates are the standard, non-discriminatory tariff or tax levels that a WTO member country promises to apply to imports from other WTO members.
The second most favourable rate has been offered to India and 16 other countries, where a flat addition of 10% has been imposed. This would mean that the Section 301 rate of 10% would be added to the current MFN rate. Countries in this bracket include Argentina, Bangladesh, Cambodia, Canada, Ecuador, El Salvador, Guatemala, Honduras, India, Indonesia, Jordan, Malaysia, Mexico, Pakistan, Sri Lanka, the UK, and Trinidad and Tobago. Notably, when the investigation began in March, Pakistan ha lower tariffs than India.
Higher rates on major Indian competitors
The third most favourable grouping includes Japan, Korea and Switzerland. These countries had, in earlier tariff structures, received better rates than India. The USTR said these three countries will now face a 12.5% rate. However, just like countries in the first category, the overall tariffs will be capped at 12.5% itself if the MFN tariff is less than that level.
“For a product of Japan, Korea, or Switzerland, where such product’s MFN tariff is less than 12.5%, the Trade Representative shall impose a section 301 tariff pursuant to these investigations so that the sum of the MFN tariff and the tariff imposed pursuant to these investigations shall be 12.5%, and where such product’s MFN tariff is greater than or equal to 12.5%, the Trade Representative shall impose a section 301 tariff of zero,” the USTR said in its finding.
The least favourable group had 38 countries, including top Indian competitors such as Vietnam and China. The USTR said these countries, like the second category, face a flat 12.5% rate, which means 12.5% over and above the MFN rates. These two countries have not only been hit with higher tariffs under the “forced labour” category but are also facing more Section 301 tariffs than India. Exporters said that with Vietnam and China facing steeper rates than India, sourcing requirements could shift to India.
‘No credible alternative to US market’
In the wake of the tariff measures imposed by the US since early 2025, a significant decline in India’s merchandise exports was widely anticipated. But trade data from the Ministry of Commerce reveals that India’s exports to the US actually grew 0.9% (or $801.7 million) from $86.5 billion to $87.3 billion, an Indian Council for Research on International Economic Research (ICRIER) report released in July said.
This, however, was driven by exports of products in the exclusion list, which primarily included pharmaceutical and electronic goods. “In 2025-26, exports of products covered under the exclusion list rose sharply by 24.5%, climbing from $29.4 billion to $36.6 billion. Exports of non-excluded products, by contrast, fell by 11.2% over the same period, declining from US$ 57.1 billion to US$ 50.7 billion – a contraction that reflects the true effect of the tariff measures imposed by the United States,” the ICRIER report said.
Even as India aggressively scouts for newer markets through free trade agreements, the report pointed out that the capacity of alternative markets to absorb India’s US export losses is “highly uneven… for some product categories, partial for others, and altogether absent for several”.
“This underscores a structural vulnerability in India’s export architecture: the limited ability of alternative markets to compensate for product-level losses in the US suggests that India’s export destination mix remains insufficiently diversified,” the report said.
US President Donald Trump at the White House on Thursday. (AP) 
A timeline of US tariff actions, compiled in an Indian Council for Research on International Economic Research report released in July.saura
The US classification of countries under Section 301 tariffs.
Share
