Quick Take
- The US imposed a 10% Section 301 tariff on India over forced labour supply chain concerns on July 24, 2026.
- India joined 16 other countries in the lower 10% band, dodging the 12.5% rate hitting 43 economies.
- India missed the textile tariff-rate quota exemption given to Bangladesh and rivals, raising order-diversion risk over three years.
In This Article
The United States imposed a 10% Section 301 Tariff on India on July 24, 2026, penalising Indian goods over forced labour in global supply chains, as confirmed by the Office of the US Trade Representative. India sits in the lower 10% band, not the 12.5% rate.
The duty falls under Section 301 of the US Trade Act of 1974 and covers 60 economies, USTR said. It replaces the temporary 10% global tariff, levied under Section 122, that expired on July 24. Because the old rate was also 10%, the overall duty burden on most Indian goods stays broadly unchanged, though the new levy has no expiry date.
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The headline rate is a red herring. India’s real exposure is not the 10% figure, which matches the expired levy, but the textile TRQ gap. Bangladesh, Cambodia, Indonesia, and Malaysia can ship a set volume duty-free using US cotton for three years, while Tirupur and Surat units cannot. That is a structural cost wedge, not a one-off. Watch India’s apparel exporters and MSME clusters closely, as this quietly reshapes sourcing decisions. Expect India to push hard for TRQ parity inside the bilateral trade talks, with a concrete ask tabled before the deal is signed in late 2026. By Avinash.
Section 301 Tariff on India: The Full Breakdown
The Section 301 Tariff on India is a 10% additional import duty on most Indian goods entering the US market. The USTR imposed it after a months-long Section 301 investigation, opened on March 12, 2026, into 60 economies accused of failing to ban forced labour imports.
India is one of 17 countries in the 10% band, while 43 economies face the steeper 12.5% rate, according to USTR. The action covers the top 60 US trade partners, representing 99.4% of US imports.
| Detail | Figure | Notes |
|---|---|---|
| Tariff rate on India | 10% | Lower band; 43 nations face 12.5% |
| Legal basis | Section 301, Trade Act 1974 | No expiry date until compliance met |
| Economies covered | 60 | 99.4% of US imports |
| Textile exports to US | About $11 Bn (Rs 1,06,556 Cr) | US is India’s largest T&A market |
| India’s exports at risk | About 70% | GTRI estimate across sectors |
| Effective date | July 24, 2026 | Replaces expired Section 122 levy |
The most striking fact is the reach. About 70% of India’s exports, including engineering goods, textiles, chemicals, machinery, plastics, leather, and gems and jewellery, fall under the new duty, per a Global Trade Research Initiative (GTRI) report.
About the Section 301 Action
Section 301 is a US trade law that lets the USTR act against foreign practices it deems unfair to American commerce. USTR chief Jamieson Greer took the final action, at President Trump’s direction, on July 23, 2026. The measure targets modern-day forced labour in supply chains. It exempts informational materials, donations, and all goods already covered by Section 232 tariffs, such as steel and aluminium.
Why did India get the lower 10% rate?
India secured the lower 10% Section 301 tariff after amending its Foreign Trade Policy on June 14, 2026, to explicitly ban imports made with forced labour. This last-minute move pulled India out of the maximum 12.5% penalty band that USTR had initially proposed on June 2, 2026.
India has already given adequate proof that there is no forced labour, and is a signatory to international labour conventions, so the impact is limited, Ajay Sahai, Director General, FIEO, told ANI.
The trade body view is cautiously calm on the overall number. Since the new 10% rate matches the expired Section 122 levy, the total burden on most goods does not rise. Products already under Section 232, such as auto components and copper, stay outside this action.
What does this mean for Indian exporters?
For Indian exporters, the Section 301 Tariff on India carries two real risks beyond the headline rate: reputational damage from the forced labour charge, and a textile disadvantage. India did not get the textile and apparel tariff-rate quota (TRQ, a set volume allowed in at a reduced duty) exemption.
Bangladesh, Cambodia, Indonesia, and Malaysia can send a specified volume of textile and apparel goods into the US duty-free for three years, provided they use US-origin cotton and fibre, per the Federal Register notice. The Confederation of Indian Textile Industry (CITI) warned this could divert sourcing orders away from India.
The pain would land hardest on MSMEs and labour-intensive units in hubs like Tirupur and Surat, which have thin margins to absorb any cost shock or order loss.
How does India compare with rival exporters?
India holds a rate edge over some rivals but a quota gap versus others. China and Vietnam sit in the higher 12.5% band, giving Indian goods a headline pricing advantage in shared categories. Yet on textiles, the TRQ exemption flips the picture in favour of Bangladesh and Cambodia.
| Country | Section 301 Rate | Textile TRQ Exemption |
|---|---|---|
| India | 10% | No |
| Bangladesh | 10% | Yes (3 years) |
| China | 12.5% | No |
| Vietnam | 12.5% | No |
What sets India apart is the combination: a lower base rate but no textile quota relief, leaving its apparel sector exposed even as broader goods gain a small edge.
What’s Next
India and the US remain locked in talks for a broader bilateral trade deal, which is expected to address New Delhi’s concerns over the Section 301 route. Earlier discussions pointed to cutting overall tariffs on Indian exports toward 18%. Expect India to press for textile TRQ parity as a formal ask before any deal closes. Will New Delhi win quota relief in time to protect Tirupur’s order book?
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Written by Avinash. Have a tip? Write to us at editorial@startupfeed.in.
