As India and the US near a landmark trade pact, New Delhi demands safeguards against Section 301 tariffs that could wipe out hard-won concessions amid forced labour probes.

India is intensifying efforts to secure protection from potential US tariffs under Section 301 of the US Trade Act of 1974 as both nations advance toward a bilateral trade agreement. With negotiations gaining momentum, Indian officials are demanding guarantees that any concessions made in the deal will not be undermined by future unilateral American actions.

A high-level US delegation led by Assistant USTR Brendan Lynch has been in New Delhi for fresh rounds of talks that began in late February 2026. The discussions cover critical areas including tariff reductions, greater market access, and dismantling of regulatory barriers. However, a major sticking point remains New Delhi’s insistence on “tariff certainty” to shield Indian exporters from the unpredictability of Section 301 investigations.

What is Section 301?

Section 301 empowers the United States Trade Representative (USTR) to investigate foreign trade practices deemed unfair or burdensome to US commerce. Unlike the World Trade Organization’s dispute settlement process, which requires multilateral consensus, Section 301 allows Washington to act unilaterally and swiftly. Measures can include additional tariffs, import quotas, licensing restrictions, or the withdrawal of previously granted trade benefits.

The tool gained prominence in the 1980s and was aggressively revived during Donald Trump’s first term, particularly against China. Following the US Supreme Court’s decision to strike down certain reciprocal tariffs imposed under the International Emergency Economic Powers Act (IEEPA), the administration has increasingly leaned on Section 301 as a more legally robust enforcement mechanism.

In March 2026, the USTR launched wide-ranging Section 301 investigations targeting excess manufacturing capacity and forced labour practices across multiple economies, including India, China, Japan, the European Union, and Singapore among others. The excess-capacity probe covers 16 economies, while the forced labour investigation spans around 60 countries.

Forced Labour Probe Adds Pressure

Compounding India’s concerns, the USTR recently proposed an additional tariff of up to 12.5 per cent on imports from India and 59 other economies, citing inadequate enforcement of bans on goods made with forced labour. The move, announced during the ongoing trade talks, has raised alarm bells in New Delhi.

According to the USTR’s 92-page report, India “has failed to impose and effectively enforce a forced labour import prohibition,” creating an “unlevel playing field” for American workers. USTR Jamieson Greer described the situation as unacceptable. The report also flagged India’s role as an intermediary in cotton supply chains potentially linked to forced labour inputs from China.

Indian experts argue the investigation focuses less on forced labour within Indian exports and more on whether India blocks such imports from elsewhere. Trade analyst Ajay Srivastava noted that the proposed tariffs appear to be part of broader US pressure tactics and should be treated separately from the bilateral trade negotiations.

High Stakes for Indian Exports

India enjoys a substantial goods trade surplus of approximately $58 billion with the US in 2025. Key sectors under scrutiny include textiles and apparel, automotive components, steel and metals, petrochemicals, chemicals, construction goods, and health-related products. These industries have driven much of India’s export growth over the past decade.

US authorities claim that government-supported policies in these sectors have led to excess manufacturing capacity beyond market demand. India has firmly rejected these allegations, asserting that the investigations lack sufficient justification and appear protectionist in nature.

New Delhi is particularly keen to ensure its exporters remain more competitive than those from regional rivals such as Bangladesh, Pakistan, and Sri Lanka. As global supply chains diversify away from China, India is aggressively positioning itself as a reliable alternative manufacturing hub for American and Western companies.

Economic Context and Challenges

The negotiations come at a challenging time. Rising tensions in West Asia have driven up energy prices and contributed to financial market volatility, exerting pressure on the Indian rupee and other emerging market currencies. Despite these headwinds, India attracted a record $94.53 billion in gross foreign direct investment during FY 2025–26, though net FDI stood at a lower $7.65 billion due to higher capital repatriation by foreign investors.

Indian negotiators fear that tariff reductions offered under the bilateral deal could lose their value if the US later imposes additional duties through ongoing or future Section 301 actions. They are therefore seeking explicit safeguards within the agreement to prevent such outcomes.

Strategic Importance

Both sides recognise the strategic importance of strengthening economic ties. For the US, India represents a vital partner in its Indo-Pacific strategy and a key destination for supply chain diversification. For India, enhanced access to the world’s largest consumer market is crucial for sustaining its ambitious export and manufacturing goals under initiatives like “Make in India.”

As talks continue, the coming weeks will prove decisive. India’s ability to extract meaningful protections against Section 301 actions could determine whether the bilateral trade agreement delivers tangible benefits or becomes another victim of unilateral trade enforcement tools.

Analysts suggest a balanced outcome might involve India strengthening its own forced labour import monitoring mechanisms while securing phased tariff reductions and dispute resolution clauses that provide greater predictability for Indian exporters.

The resolution of these issues will not only shape the future of India-US economic relations but could also set a precedent for how Washington engages with other emerging market partners amid its renewed emphasis on reciprocal and enforcement-focused trade policy.

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