Forced Labour Tariffs: Implications for India–U.S. Trade Relations

28 Jul 2026

GS II: Bilateral, regional, and global groupings and agreements involving India and/or affecting India’s interests.

Context: The United States (U.S.) has imposed an additional 10% tariff on imports from India and several other countries under Section 301, citing concerns over goods allegedly linked to forced labour in global supply chains.

About the New U.S. Tariffs

Section 301 Tariffs: The U.S. has imposed an additional 10% tariff on imports from several countries, alleging that certain goods may be linked to forced labour in global supply chains.
Trade Agreement Advantage: Countries having Free Trade Agreements (FTAs) or advanced trade negotiations with the U.S., including the European Union, Japan, South Korea, Taiwan, and Switzerland, have received comparatively favourable tariff treatment.
Permanent Trade Instrument: Unlike the earlier temporary reciprocal tariffs, these measures are intended to function as a long-term trade policy instrument.

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Issues Raised by the Tariffs

Questionable Objective: The selective application of tariffs suggests that the measure is aimed more at encouraging trade agreements than eliminating forced labour.
Third-Country Liability: India has not been accused of using forced labour, yet faces tariffs because of concerns regarding imports originating from third countries, raising questions about fairness.
Departure from Non-Discrimination: Differential tariff treatment based on trade agreements may undermine the Most Favoured Nation (MFN) principle under the World Trade Organization (WTO) framework.
Policy Uncertainty: Frequent changes in U.S. tariff policy create uncertainty for exporters, investors, and global supply chains.
Enforcement Challenges: Verifying labour conditions in third countries requires extensive international cooperation and remains difficult to implement effectively.

Implications for India

Export Competitiveness: Additional tariffs may reduce the competitiveness of Indian exports in the U.S. market, particularly in labour-intensive sectors.
Supply Chain Diversification: Indian industries may need to strengthen due diligence, improve supply chain traceability, and diversify sourcing to reduce exposure to forced labour-related trade restrictions.
Trade Negotiations: The tariffs increase pressure on India to conclude a bilateral trade agreement with the U.S., despite continuing uncertainty regarding future trade measures.
Regulatory Compliance: India’s prohibition on imports produced through forced labour demonstrates its commitment to responsible trade practices and international labour standards.

Way Forward

Safeguard Strategic Autonomy: India should pursue trade negotiations based on long-term national interests rather than responding to temporary tariff pressures.
Strengthen Supply Chain Transparency: Develop robust traceability systems, due diligence mechanisms, and supply chain audits to ensure compliance with international labour standards.
Diversify Export Markets: Expand trade partnerships through Free Trade Agreements (FTAs) and strengthen engagement with both emerging and developed markets.
Promote Rules-Based Trade: Continue supporting a transparent, predictable, and WTO-consistent multilateral trading system.
Enhance Domestic Competitiveness: Improve manufacturing competitiveness through better infrastructure, logistics reforms, technology adoption, and ease of doing business.

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Conclusion

India’s trade policy should remain anchored in strategic autonomy, rules-based multilateralism, and long-term economic interests. While addressing concerns relating to forced labour is essential, trade measures should be implemented in a fair, non-discriminatory, and WTO-consistent manner without undermining India’s negotiating position or export competitiveness.