India must not let US Section 301 threats push it into a lopsided trade deal: Experts (original) (raw)

As India awaits the report of the Section 301 investigations on excess capacity after being saddled with a proposed 12.5 per cent tariff for the first one on forced labour, many experts believe the government should not allow the two to be linked to the ongoing India-US trade negotiations, as Washington’s unilateral measures violate global rules and offer no long-term policy certainty.

Trade experts warn that relying on a bilateral trade pact to shield Indian exports from aggressive US trade actions may fail. They argue that unilateral actions, like the proposed 12.5 per cent tariff on alleged forced labor grounds, must be contested independently rather than bundled into trade concessions.

“The proposed US tariffs of 12.5 per cent on the specious ground of not stopping imports of goods where there is alleged use of forced labour is in violation of WTO rules,” said WTO expert Mukesh Bhatnagar. “This must be contested upfront and challenged in the WTO if actually applied.”

Former trade negotiator Abhijit Das echoed this sentiment, cautioning against mixing legal disputes with broader trade pacts. “Dealing with 301 tariffs, which ab initio are illegal from a WTO perspective, through the trade deal is fraught with risks. There is no certainty that Trump will uphold his side of the deal. India should muster the political will to take retaliatory action against the US, as it had done against the illegal steel and aluminium tariffs under Trump 1,” he said.

Commerce Minister Piyush Goyal recently indicated that an interim India-US trade deal is likely mid-July, but clarity on the US tariff front remains elusive. Going by the February 6 framework, the US would impose steep tariffs of 18 per cent (over and above regular MFN tariffs) on Indian goods, while India would eliminate or slash import duties on all industrial goods and wide range of agricultural goods.

But with the US Supreme Court invalidating the 25 per cent US reciprocal tariffs and the 10 per cent temporary global tariffs set to lapse on July 24, there is no logic for India to agree to high additional rates of 18 per cent, other than the fear that lacking a deal, Section 301 tariffs may be higher.

Experts also point out that an agreement with the US provides no immunity against future trade hostility. “The FTA with the US will not insure against future tariff backlash on different issues, be it labour or environment or any other. This is evident from the issues that countries which have trade agreements with the USA are facing,” said Arpita Mukherjee, Professor at ICRIER.

Instead, Mukherjee suggested a rigorous empirical defense: “The USTR has called for comments and the first step is to see if we can challenge the authenticity of the claim technically and scientifically with evidence.”

The dilemma lies in balancing potential market access against the steep concessions Washington demands. Former JNU professor Arun Kumar suggested a cold calculation of interests. “If we do an FTA, why should Section 301 be an additional tariff on India? It should be negotiated with some give and take,” he notes. “Under an FTA, the US will extract many concessions. If no FTA, they will levy high tariffs on India. But we need not give in to what they want. We will have to do a comparison of the gains and losses of higher tariffs vs. concessions the US wants.”

Exporters have pinned their hopes on a diplomatic, structured resolution to prevent immediate supply chain disruptions. “Any concerns arising from Section 301 should ideally be addressed through dialogue and evidence-based discussions rather than unilateral measures. A calibrated framework, including greater tariff certainty, may help to provide stability to businesses, but the final outcome should safeguard India’s developmental priorities while supporting stronger bilateral trade and investment ties,” said Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO).

Published on June 7, 2026