The US Trade Representative (USTR) is moving ahead with a forced labour investigation that could impose a 12.5% tariff on over 50 countries, including India, creating fresh uncertainty for exporters as the deadline for the current 10% additional tariff approaches July 24, according to a Business Today report.
The Probe and Proposed Tariffs
From Tuesday to Thursday, USTR will hold public hearings on the forced labour probe, which involves 60 economies, the report said. USTR has proposed a 12.5% tariff on over 50 countries, including India, for their alleged failure to crack down on goods using forced labour – a charge that the Indian government has denied, according to the report.
Separately, USTR is also investigating alleged structural excess capacity in several sectors, but has yet to make public its preliminary findings in that case. The report noted that policymakers and experts indicated the US is likely to replace the 10% tariff in place until July 24 with the forced labour tariff and then use the structural overcapacity tariff as a bargaining chip to bring countries to the negotiating table for bilateral trade deals.
| Probe | Proposed Tariff | Countries Covered | Status |
|---|---|---|---|
| Forced labour | 12.5% | Over 50 countries including India | Public hearings this week |
| Structural excess capacity | Not yet announced | Several sectors, countries TBD | Preliminary findings pending |
Implications for India
India and the US have been engaged in negotiations on firming up the framework agreement for the first tranche of a trade deal, including at the ministerial level, according to the report. However, the final tariff – key to operationalising the deal – can only be decided once the Trump administration is ready with its revamped tariff plan. India has sought that it should retain a comparative advantage compared with rival nations such as China, Vietnam, Bangladesh and ASEAN countries, the report said.
The 10% tariff was imposed in February by the Trump administration after the US Supreme Court trashed the reciprocal tariffs imposed last August. That move also put the trade deal with countries such as India on the backburner, the report noted.
What Exporters Can Expect
Exporters can heave a sigh of relief if the 10% tariff is replaced with the proposed 12.5% levy, according to the report. The reason is that the 12.5% tariff will cover a majority of the countries that are India’s competitors in different product segments, thus maintaining a level playing field. The report did not specify which product segments would be most affected, but the broad coverage offers some predictability.
The uncertainty stems from the fact that USTR has not yet finalised the tariff rates or the exact list of products, and the structural overcapacity probe could add another layer of complexity. Importers and exporters should monitor the public hearings this week for further clarity.
Policymakers and experts indicated that given the pace of the probe, the US is likely to replace the 10% tariff in place until July 24 with tariff related to forced labour and then use the additional tariff on structural overcapacity as a bargaining chip.
The coming weeks will determine whether the forced labour tariff becomes the new baseline or if further negotiations lead to a different outcome.
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