Section 301: A New Challenge in India-US Interim Trade Agreement

Ameya Satam

Introduction 

Section 301 allows the USTR (US Trade Representative) to scrutinize the acts, policies, and practices of foreign governments. It also decides if the acts, policies, and practices of those countries are invalid or discriminatory and obstruct or restrict the US’s trade. In the scrutiny, if it is found that the country carries out discriminatory methods, then the US government can retaliate by imposing punitive tariffs, or other trade-related actions can be carried out against the country involved. This section is applicable as a trade prosecution tool since it was introduced in the US Trade Act of 1974.

Due to this power of the section, it has been noted as the most powerful medium through which the American trade policy can limit the trade of the other country. The most evident use of this section was seen during the US-China trade war in 2018 (Economic Times Bureau, 2026). The US had increased tariffs on Chinese products due to the Section 301 investigation against the theft of intellectual property and forced technology transfers. But, in the current times as well, this section is being discussed because the US has invoked this particular section opposing India, which has been observed as an important legal issue clouding the India-US Interim Trade Agreement.

USTR Jamieson Greer declared the beginning of the investigations into the acts, policies, and practices of various economies in March 2026, which included India. Since 2nd June, India has been listed in the 60 economies that are specified as the economies carrying out unfair trade practices like forced labour according to the USTR (Singh, 2026). However, the US Supreme Court has objected to President Donald Trump’s action of charging tariffs, as the International Emergency Economic Powers Act (IEEPA) does not allow the President to conduct this action. 

Importance

Due to this section, the involved country’s products will be charged an additional 12.5% duty, which may discourage the involved country’s exporters from trading with the US. However, as per the proposal, India is being charged about 10% of the additional duties under Section 122 (Economic Times Bureau, 2026). The main point is that India is being investigated under Section 301(b), which is part of the Trade Act of 1974 (Economic Times Bureau, 2026).

This subsection of the section focuses on the structural excess capacity and production in the manufacturing fields of the involved country. Through this, the US is trying to control India’s export growth. It is noted that India’s solar module manufacturing is almost triple if counted according to the yearly domestic demand. Along with this, India has also gained in the fields of petrochemicals, steel, and other industries. Along with this, the US is investigating forced & child labour issues in the imports, which are aimed at targeting India’s supply chain. This exposes a wider group of sectors that India must defend itself in from US for maintaining good trade relations.  

Fig No.1.1: Baseline vs. Total Combined US Tariffs on India (2025–2026). This chart tracks 15 months of fluctuating US trade enforcement, highlighting the drop from a peak 50% penalty down to an aligned 10% framework. This stabilized rate forms the immediate backdrop for ongoing bilateral negotiations aimed at resolving impending Section 301 supply chain disputes. Source data adapted from: TOI Business Desk, 2026. Chart generated by the author using Microsoft Power BI software.

Chronological Reference to Fig No. 1.1:
2 June 2026: USTR formally lists India among 60 economies cited for unfair trade practices, as bilateral interim trade talks begin in New Delhi.
02 April 2025: US announced a 26% tariff on Indian goods.
09 April 2025: Tariffs temporarily delayed to allow negotiations.
31 July 2025: 25% flat tariff comes into effect; pharma and electronics exempt.
06 August 2025: Additional 25% penalty added due to India’s energy purchases from Russia.
02 February 2026: Joint deal drops reciprocal tariff to 18% and removes the Russian oil penalty.
24 February 2026: USTR issues Section 301 determination regarding forced-labor import bans across multiple economies.

The officials from the US visited India and held talks on the India-US Interim Trade Deal with Indian officials from 1 June to June 4 in which these issues were highlighted in the presence of USTR officials. It is said that these talks have progressed in the mutual benefit of both countries. The deal is very close to finalization while a few issues like these are still being discussed to resolve. 

But, the deal is not concluded and the shareholders still can influence the outcome of the India-US Interim Trade Deal as they are invited to participate in hearings till 22 June. The hearings are planned to happen on 7 July, and the deadline for submitting the written comments is 6 July (Singh, 2026). The submitted written comments will be reviewed, and a decision will be made by the USTR based on them. India has become critically exposed to the Section 301 proceedings, as it will decide the fate of the Indian trade in the US. On 24 July, the imposition of Section 122 will end, and again Section 301 will be imposed. 

Though the President of the US, Donald Trump, has highlighted how the trade policies of India have benefited India for years through high tariffs on the US, he has still expressed positive views on the trade deal. While unpredictable executive rhetoric introduces an element of volatility, a formalized, legally binding agreement is essential to provide institutional assurance for this deal because India was one of the first countries to start trade talks with the US in the last year. However, India and the US are still negotiating, which is temporarily stagnating trade growth for both countries. 

According to the deal, India has promised to purchase more American goods, including energy, aircrafts, technology and agricultural products which will be of the value of $500bn (Telegraph India Web Desk, 2026). This deal of $500bn will benefit India as well as the US, but the additional duties of 12.5% on Indian products will create a trade imbalance, as the Indian products in the US market may get sold at higher prices, which will decrease the buyers for Indian stakeholders.

Tariffs on particular Indian aircraft and aircraft parts are going to be removed as per the Interim Agreement, but if the Section 301 remains valid, then tariffs may still be applied on them. The sales of Generic pharmaceuticals and pharmaceutical ingredients in the US, which are made in India, may be impacted. Commitment to preferential market access for both parties may fail for India. 

Challenges  

In 2023, the Global Slavery Index (GSI) noted that in India itself, there are 11 million people who are living in modern slavery for their survival. This is the highest number in any country ever recorded.  Modern slavery also involves human trafficking for organ removal and the use of children in armed conflicts. However, the US imposing additional duties on India in trade is reasonable, as India’s condition in modern slavery is very serious. Forced labour has been observed as the most common type of modern slavery in India. Various modern slaves are bonded labourers. These forced labourers are mostly found in the manufacturing of garments, textiles, and silk, agriculture, brickmaking, tea production, and illegal mica mining.

Table No. 1.1:- Child Labour and Forced Labour Issues in the mentioned manufacturing sectors of India. Source: U.S. DOL ILAB List of Goods (2024) 

Most of the cases related to forced labour have been noted in the global supply chains, due to which other countries are also subjected to this exploitation. Yearly, India imports US$23.6 billion worth of products, which have a high probability of being produced through forced labour. The Informal nature of work in the manufacturing, construction and services in urban areas, and in rural areas, agriculture and the handloom sector has a significant participation of informal workers. These workers lack formal contracts, fair wages, and access to social protections, land ownership, and bank loans, making them vulnerable to extortioners and increasing their risk of debt bondage and forced labour.   

Conclusion

The Indian government’s watch over modern slavery in India is necessary, as this issue is also impacting India on the international level. Forming a national unit to address the forced labour issue in the supply chains and in industries may end this issue. Formalizing the informal sector will restrict such illegal forced labour activities. A powerful and strict judicial law on this problem will discourage people from practising forced labour. India could consider introducing a law similar to Section 301 to discourage other countries from relying on forced labour while trading. 

A high-level team from the US is expected to visit India at the end of June. Before that time, the Indian government’s necessary step towards ending modern slavery in India may compel the USTR to reconsider or mitigate the imposition of additional duties on Indian products. India can negotiate through this with the US by strictly monitoring the sectors that are involved in forced labour and child labour, and exporting products that are being sent to the US. It is necessary for India to educate the uneducated people about the forced labour issue, which will create awareness among the people, and such issues will eventually be resolved. 

Fundamentally, establishing rigorous local monitoring mechanisms should not be limited to managing international optics; it is a vital economic necessity to align Indian supply chains with tightening global ESG (Environmental, Social, and Governance) standards, thereby protecting India’s long-term access to Western markets.

References

1. Economic Times Bureau. (2026, June 2). As India-US trade talks resume in New Delhi, here’s what Section 301 means for the deal. The Economic Times.
   
2. https://economictimes.indiatimes.com/news/economy/foreign-trade/as-india-us-trade-talks-resume-in-new-delhi-heres-what-section-301-means-for-the-deal/articleshow/131460447.cms?from=mdr 
   
3. Singh, S. (2026, June 4). India, US agree framework for interim trade deal after four days’ talks; USTR tariff review runs parallel. India Today.
   https://www.indiatoday.in/india/story/india-us-agree-framework-for-interim-trade-deal-after-four-days-talks-ustr-tariff-review-runs-parallel-2922090-2026-06-04 
   
4. Yadav, N. (2026, June 5). Trump confident of India trade deal despite new tariff threat. BBC News. https://www.bbc.com/news/articles/c0424dwvv2ko
   
5. Walk Free. (2023, May 24). Global Slavery Index: India country study. https://www.walkfree.org/global-slavery-index/country-studies/india/ 
   
6. Bureau of International Labor Affairs. (2024, September 5). List of goods produced by child labor or forced labor (Page 2). U.S. Department of Labor. https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods?page=2 
   
7. DD News Desk. (2026, June 2). India-US strengthen trade ties with interim agreement framework. DD News. https://ddnews.gov.in/en/india-us-strengthen-trade-ties-with-interim-agreement-framework/ 
   
8. Telegraph India Web Desk. (2026, June 6). India, US move to seal vibrant first phase of interim trade pact; Piyush Goyal hints at July rollout. The Telegraph India. https://www.telegraphindia.com/world/india-us-move-to-seal-vibrant-first-phase-of-interim-trade-pact-piyush-goyal-hints-at-july-rollout/cid/2164157#goog_rewarded 
   
9. News On AIR Desk. (2026, June 5). USTR delegation concludes four-day India visit, advances talks on bilateral Trade Agreement. News On AIR. https://newsonair.gov.in/ustr-delegation-concludes-four-day-india-visit-advances-talks-on-bilateral-trade-agreement/ 
   
10. Times of India Bureau. (2026, June 5). ‘He is a good friend of mine’: Trump praises PM Modi, says US and India will get to a trade deal. The Times of India. https://timesofindia.indiatimes.com/india/he-is-a-good-friend-of-mine-trump-praises-pm-modi-says-us-and-india-will-get-to-a-trade-deal/articleshow/131518838.cms 
    
11. TOI Business Desk. (2026, February 21). From 26% to 50% to 10%: A timeline of Donald Trump’s tariffs on India. The Times of India. https://timesofindia.indiatimes.com/business/international-business/from-26-to-50-to-10-a-timeline-of-donald-trumps-tariffs-on-india/articleshow/128639394.cms 

About the Contributor

Ameya Satam is a Research & Editorial Intern at IMPRI specializing in International Relations and Strategic Studies. He completed his post-graduation in International Relations at Sikkim University, focusing on Indo-Pacific geopolitics and India–US cooperation, and is dedicated to analyzing regional security frameworks to inform evidence-based policy discourse. 

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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Acknowledgement 

The author extends sincere thanks to the IMPRI team for their guidance.

He also extends his sincere thanks to Ms.Shivani Chauhan and Mr.Syed Suheb for their valuable feedback, useful suggestions, and support in shaping this article.

This article was posted by Yashkirti Pal, a Research and Editorial Intern at IMPRI.