US Tariffs Redrawn: India Faces 10% Forced Labour Levy

The United States has officially imposed a 10 per cent tariff on imports from India following a Section 301 investigation regarding forced labour practices. This policy adjustment targets sectors identified by US regulatory bodies as having potential supply chain risks regarding labour standards. Major domestic industries, particularly textiles, engineering products, and chemicals, face immediate scrutiny under these intensified trade protocols. India narrowly avoided a more severe 12.5 per cent rate initially proposed by the Office of the US Trade Representative after the government proactively tightened domestic rules against forced labour imports.

This measure stems from mounting pressure within the US legislature to curtail reliance on foreign production chains suspected of violating international labour norms. For years, US trade representatives have raised concerns regarding the informal nature of work in some Indian manufacturing clusters. By amending its Foreign Trade Policy on July 13, 2026, to explicitly ban the import of goods produced via forced labour, New Delhi successfully avoided the higher tariff tier. The 10 per cent duty is technically temporary, pending the finalization of a broader bilateral trade agreement between New Delhi and Washington, placing India alongside 16 other economies like the UK, Bangladesh, and Mexico.

The levy threatens to erode the competitive advantage of Indian exporters in the global textile and manufacturing market, though exporters retain relative competitiveness as the same tariff applies to many regional competitors. However, concern is rising over newly established textile tariff-rate quotas that grant preferential access to the US for competitors like Bangladesh, Cambodia, Indonesia, and Malaysia. Policymakers in New Delhi are now expected to accelerate negotiations for an interim bilateral trade agreement while manufacturers navigate the new cost burdens and supply chain adjustments.