US Imposes 12.5% Extra Tariff On India

This is the first set of tariffs proposed after the Section 301 investigation by the United States Trade Representative.

India has been grouped with countries including China, Japan, South Korea, Brazil and Switzerland, which could face a 12.5 per cent tariff for allegedly lacking effective prohibitions or enforcement mechanisms to prevent forced labour-linked products from entering supply chains.

“The Section 301 investigations were divided into two parts. The findings on labour issues have come out and these tariffs could go higher once the findings on excess production capacity in different sectors are also announced. So, there is a possibility of countries, including India, facing much higher tariffs,” said Abhijit Das, former head of the Centre for WTO Studies.

According to him, these tariffs, like reciprocal tariffs and the 10 per cent tariffs under Section 122, are illegal under WTO norms.

“The 12.5 per cent tariffs exceed the US’ WTO commitments as they are above bound tariff rates. Hence, they are WTO-inconsistent,” said GTRI.

Ajay Srivastava, founder of GTRI, said India could argue that the investigation exceeds the scope of Section 301, which traditionally addresses market-access barriers faced by US firms rather than a country’s import-control policies.

The tariffs can also be challenged in US courts, as other tariffs have been.

“It is quite likely that the Section 301 tariffs will be challenged. How US courts will view it, I am not sure, but we cannot rule out the possibility that they may rule against Section 301 tariffs as well. But there are a few other sections in the US statute under which President Trump could impose other types of tariffs,” Das said.

“Nothing prevents President Trump from unleashing a barrage of tariffs in the future against India and other countries. So, tariff risk will remain even despite a bilateral trade agreement,” Das said.