Trump Administration Warns of Returning Tariffs Amid India-US Trade Talks

As India and the United States work toward finalizing a bilateral trade agreement, the Trump administration has issued a stern warning that previous tariff levels could return. US Treasury Secretary Scott Bessent has signaled that ongoing Section 301 investigations may trigger new duties, complicating the negotiations currently being led by Commerce Minister Piyush Goyal and US Trade Representative Jamieson Greer.

The Section 301 Threat and Bessent’s Warning

US Treasury Secretary Scott Bessent has made it clear that the administration is prepared to use Section 301 of the US Trade Act of 1974 as a strategic lever. Following a US Supreme Court ruling that declared reciprocal tariffs illegal, the administration is pivoting toward Section 301 investigations to achieve similar negotiating outcomes.

Bessent noted that while a 10% global tariff (under Section 122) is currently in place, these rates could revert to much higher levels if investigations into foreign trade practices are successful. The current 10% Section 122 tariffs are scheduled to expire on July 24, 2026, creating a critical window for the USTR to implement new measures.

Forced Labour Allegations and Proposed 12.5% Duty

A significant tension point in the current trade climate is the USTR’s preliminary findings regarding forced labour. India is among 54 economies identified by the USTR as having failed to effectively prohibit imports linked to forced labour.

Based on these findings, the USTR has proposed an additional 12.5% tariff on imports from India and over 50 other nations. While these duties are not yet finalized, the timeline is aggressive: countries have until June 22, 2026, to request hearings, with written submissions due by July 6. A final determination is expected in July, potentially coinciding with the expiration of current tariffs, which could lead to an immediate imposition of the new, higher rates.

India’s Stand: Protecting Competitive Advantage

The threat of these tariffs comes at a delicate moment. USTR Ambassador Jamieson Greer recently met with Minister Piyush Goyal to finalize the first phase of a bilateral trade agreement (BTA). Earlier this year, a trade pact had been announced to reduce tariffs on Indian exports from 50% to 18%.

However, Minister Goyal has remained firm on one non-negotiable condition: India must maintain a competitive advantage over its regional peers. Goyal emphasized that the attractiveness of the previous deal lay in India having lower tariffs than neighboring and ASEAN competitors like Vietnam, Thailand, the Philippines, Indonesia, Malaysia, and China.

"Until that framework of getting that competitive advantage can be finalised, we can't enter into force a US deal," Goyal stated, highlighting that India will not sacrifice its market position to satisfy US trade demands.

Key Takeaways

  • Strategic Shift: Following a Supreme Court ruling against reciprocal tariffs, the Trump administration is utilizing Section 301 investigations to pressure trading partners.
  • Impending Tariffs: India faces a proposed additional 12.5% tariff due to USTR findings regarding forced labour, with a final decision expected in July 2026.
  • Negotiation Deadlock: India refuses to finalize the US bilateral trade agreement unless it ensures a competitive tariff advantage over regional rivals like China and ASEAN nations.