Reading this on Krawl? Register for free.
Unlock listen-aloud, reading history and personalised feeds — at zero cost.
Free registration unlocks the full Finance Desk
India Gains Trade Advantage as US Imposes New Tariffs on Peers
India has secured a favorable trade position by banning the import of goods produced with forced labor. This action reduces additional US tariffs on Indian exports to 10% from a proposed 12.5%. Competitors like China, Vietnam, and Thailand face a 12.
India Secures Tariff Advantage
India has managed to reduce additional tariffs on its exports to the United States from a proposed 12.5% to 10% by implementing a ban on importing goods produced using forced labor. This move provides a competitive edge over other countries such as China, Vietnam, Thailand, and Türkiye, which will now face a 12.5% tariff rate. This strategy has positioned India favorably compared to its global competitors.
US Tariff Impositions and Investigations
The US announced additional tariffs on 60 economies for failing to enforce a prohibition on forced labor goods. Nations that have already prohibited such imports will incur a 10% additional tariff. These new tariffs apply to India, which is actively negotiating a trade deal with the US.
India initiated its import prohibition through a notification on July 13, covering 17 countries, including Bangladesh, Pakistan, Sri Lanka, Indonesia, Malaysia, and the United Kingdom. These countries previously benefited from lower tariffs. Consequently, Indian exporters maintain their competitive standing against nations like Bangladesh, Cambodia, Pakistan, Sri Lanka, Indonesia, and Malaysia, particularly in labor-intensive sectors such as textile, garments, leather, and footwear.
For the European Union, Taiwan, Japan, South Korea, and Switzerland, additional tariffs are applied on a net basis, meaning combined tariffs will be based on the prescribed level rather than stacked on existing Most Favored Nation (MFN) tariffs. The remaining tariffs will be 12.5%. Approximately 70% of India's exports to the US will now be subject to MFN tariffs plus a 10% Section 301 duty. Section 232 products, including steel, aluminum, copper, and auto components, will continue to face 25%-50% tariffs.
The tariffs, imposed under Section 301 of the Trade Act, supersede previous 10% additional duties under Section 122 of the Trade Act, which expired on Friday. These tariffs were instated following the US Supreme Court's invalidation of country-specific tariffs previously imposed via executive order. While Section 122 tariffs were temporary (150 days), Section 301 tariffs are permanent unless reversed by the US administration.
Forced Labor and Broader Trade Probes
An investigation into products made with forced labor that harm American commerce began on March 12 under Section 301. It covered 60 trade partners of the US, accounting for 99.4% of its imports. The investigation report, released on June 2, recommended tariffs ranging from 10%-12.5% on all 60 economies. Following public hearings and consultations, US Trade Representative Jamieson Greer published the final findings, affirming the tariffs.
Beyond forced labor, the Office of the USTR is conducting another investigation into the policies of India, China, the EU, Singapore, Switzerland, Japan, and nine other economies. This probe targets policies that enable excess manufacturing capacities and negatively impact American businesses, potentially leading to further tariffs.
The forced labor tariffs exempt raw materials and agricultural inputs that the United States cannot produce in sufficient quantities. Also exempt are products whose taxation could lead to inflation or supply disruptions, as well as selected industrial inputs, including certain plastic resins, medical supplies, and metal products.
Found this useful? Share it!
Interested in Finance Education?
Explore our CFA and investing courses — built for serious learners.
