A fresh tariff threat from President Trump's trade office

Report By Y-Trendz

A fresh tariff threat from President Trump's trade office is now hanging over 60 countries, including India, this time built on accusations of forced-labor enforcement failures rather than the trade-deficit

rhetoric that has dominated his second term.

On June 2, 2026, the Office of the U.S. Trade Representative announced proposed additional tariffs on all 60 economies it investigated under Section 301 of the Trade Act of 1974, after finding that each had failed to impose or effectively enforce a ban on importing goods made with forced labor. USTR determined this failure was "unreasonable" and burdens U.S. commerce, opening the door to new punitive duties. Of the 60 economies probed, 54 — including India — were found to have no forced-labor import prohibition at all, while six others, among them Canada, Mexico and the European Union, had rules on the books but weak enforcement.

The proposed penalties come in two tiers. Fourteen economies with at least partial prohibitions or reciprocal-trade commitments — including Canada, the EU, Indonesia, Mexico, Pakistan, Bangladesh, and Britain — face a 10% additional duty. The remaining 46, a group that includes India, China, Japan, South Korea, Vietnam, Brazil, Australia and Saudi Arabia, face the steeper 12.5% rate. U.S. Trade Representative Jamieson Greer framed the action as a matter of fairness for American workers, arguing that the failure of major trading partners to curb forced-labor goods forces U.S. workers to compete on an uneven footing.

The move traces back to the collapse of Trump's earlier tariff architecture. In February 2026, the Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act exceeded presidential authority, forcing the administration to refund an estimated $166 billion collected from more than 330,000 businesses. Rather than retreat, the White House pivoted to a two-track strategy: a temporary 10% global tariff under Section 122, capped at 150 days and set to expire July 24, 2026, paired with longer-lasting Section 301 investigations — like this forced-labor probe — that face no such time limit. Officials have signaled they intend to have the new duties ready to take effect around the time the Section 122 tariff lapses.

For India, the timing adds to an already turbulent 18 months of trade friction with Washington. Last year, the Trump administration slapped India with a 25% "reciprocal" tariff plus another 25% penalty over its continued purchases of Russian oil, pushing the total rate to 50% — among the highest imposed on any U.S. trading partner. That rate was later cut to 18% in February 2026 after Indian oil companies agreed to scale back Russian crude purchases. The new forced-labor tariff would stack an additional 12.5% on top of whatever baseline applies, threatening sectors like textiles, gems and jewellery, pharmaceuticals, and marine products that industry analysts have flagged as especially exposed.

India is not accepting the finding quietly. A three-day USTR public hearing began July 7 in Washington, and India's turn came the following day, July 8, with representatives from the Ministry of Commerce and Industry, the Agricultural and Processed Food Products Export Development Authority, and industry bodies including FICCI and CII presenting the country's rebuttal. In written submissions, India has argued that the USTR's findings ignore its existing legal framework — a mix of statutory prohibitions, institutional mechanisms and ongoing policy measures aimed at reducing forced-labor vulnerabilities — and has called the determination legally flawed. Trade groups such as the All India Spice Exporters Forum have also filed objections.

India isn't alone in pushing back. China has separately argued the tariff findings are overly broad and not justified, according to Law360, while industry voices in the U.S. itself have questioned the approach. The American Apparel and Footwear Association's Nate Herman told trade publication WWD that new tariffs are not the right tool to curb forced labor, a view echoed by groups representing companies that source from many of the 60 targeted countries.

The proposed duties remain just that — proposed. USTR is accepting public comments through July 6 and continuing hearings this week, with a final decision expected in the weeks ahead. But given the administration's determination to rebuild its tariff powers after the Supreme Court setback, and the looming July 24 expiration of the interim global tariff, exporters across India's labor-intensive industries are bracing for the possibility that this forced-labor rationale becomes the new legal foundation for tariffs that were struck down just months ago.