India should not let the U.S.’s new tariffs push it towards a trade deal

India should not let the U.S.’s new tariffs push it towards a trade deal

The 10% tariff that the United States has imposed on India and several other countries over their imports of goods supposedly made using forced labour is merely an attempt to restore permanent tariffs and, once again, highlight the benefits of a trade deal with the U.S. The U.S. Supreme Court’s February 2026 decision dealt a body blow to the U.S.’s attempts to secure trade deals. The main threat, of high reciprocal tariffs, had been removed. U.S. President Donald Trump’s solution, of a temporary 10% tariff on all countries, suffered from two weaknesses: it would expire in 150 days, and was levied on all countries equally, regardless of whether they had a deal with the U.S. or not. Those tariffs have now expired. The Section 301 ‘forced labour’ tariffs announced last week are more permanent, and have carved out benefits for those with trade deals with the U.S. For example, while U.S. imports from India will face a 10% tariff over and above the base tariff the U.S. charges everybody, the European Union and Taiwan will face a total tariff of 10%. Similar benefits have been accorded to Japan, South Korea and Switzerland, all of which also have trade deals with the U.S. at various stages of formalisation. If stopping forced labour was the primary focus, tariffs would have been applied equally across all offenders, regardless of trade deal status. The tariffs would also not have had as many product-wise exemptions and country-wise quotas as the final version has.

There is also the question of whether the U.S. should be penalising other countries for their trade with third parties. India has not been accused of using forced labour, yet faces tariffs because others have been. This, soon after the U.S. government told a court that it did not want to act as the “world police”. India has done well to reduce the proposed 12.5% tariffs to a final 10%, the same as or better than most of its competitors. All it took was a notification banning the import of goods made using forced labour. The action itself will be difficult to enforce, since it will require countries such as China and Malaysia to allow Indian government officials to visit and investigate their labour conditions. But simply issuing the notification won India a tariff reduction. However, uncertainty persists since the other Section 301 investigation, on excess capacity, is yet to play out and could result in further tariffs. It is highly unlikely that India will accept a trade deal until those tariffs become clear. That said, the tariffs should not push India towards a deal. Experience has shown that the U.S. tariff landscape can change radically even after a deal is signed.