US Proposes New 12.5% Tariff on India: What May Get Costlier and Which Sectors Could Be Impacted?

India is going to face a fresh trade challenge after the US proposed an additional 12.5% tariff on multiple imports from India due to concerns related to forced labour regulations.

The proposal was announced by the Office of the US Trade Representative (USTR)on June 2nd and is going to target 60 economies that Washington claims have failed to effectively ban or restrict goods produced using forced labour.

The proposed duties are being considered under Section 301 of the Trade Act of 1974 and could majorly impact many top Indian export sectors, including textiles, apparel, gems and jewellery, leather products, seafood, automobiles and auto components.

Why Has the US Proposed New Tariffs on India?

According to the USTR, an investigation found that 60 countries have not adequately prohibited or enforced restrictions on imports linked to forced labour. The agency said that this creates an "unlevel playing field" for American workers and businesses.

"The failure of our most important trading partners to address the importation of goods made with forced labor is unacceptable. This creates a dynamic where American workers are forced to compete globally on an unlevel playing field," said Ambassador Jamieson Greer in an official statement.

Under the proposal, countries that already have rules to block goods made using forced labour would face an extra 10% tariff. However, countries that do not have such rules in place, including India, would be charged a higher additional tariff of 12.5% on their exports to the US.

After the US Supreme Court blocked an earlier tariff policy, the Trump administration began looking for new ways to impose trade restrictions.
However, the proposed tariffs are not final yet and will go through a public consultation process before any decision is implemented.

According to the Official Statement, "interested parties can submit requests to participate in USTR hearings until June 22, 2026, while written comments can be filed until July 6, 2026. The USTR is scheduled to hold public hearings on the proposal on July 7, 2026."

Which Indian Exports Could Become More Expensive in the US?

If the new tariff is implemented,it would be added on top of existing duties, increasing costs for American importers purchasing Indian goods. The following sectors may bear the burnt:

Textiles & Apparel: India's textile and garment industry is expected to be among the biggest casualties. Indian exports such as ready-made garments, kurtas, home textiles and apparel could become more expensive in the US market. The USTR specifically pointed out that textiles, garments, thread and yarn are those sectors vulnerable to forced labour concerns.

Gems and Jewellery: US is one of the largest export destinations for Indian gems and jewellery. Additional tariffs could raise prices for Indian jewellery products in America.

Leather Goods: India's leather manufacturing sector may also face increased pressure as leather products and footwear become costlier for US buyers.

Seafood: After already being affected by previous rounds of US trade measures. India's seafood exports, particularly shrimp, could face another setback.

Automobiles: Indian automobile and auto parts exports could also be affected, as the higher tariffs would make these products more expensive for buyers in the US.

Relief for India: What Gets Cheaper?

Currently, nothing automatically gets cheaper for Indian consumers or exporters.

However, there is some potential relief for India in the proposed 12.5% tariff plan, though it comes with important conditions.

"The U.S. Trade Representative also proposes a textile mechanism that would allow a certain volume of apparel and textile imports from certain economies to enter the United States at a reduced Section 301 tariff rate," the statement read
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This could provide partial relief to India's textile sector, which is heavily dependent on US exports. However, the exact details, such as the volume cap and which specific products qualify, are still unclear at this stage. Until these are finalised, Indian textile exporters face uncertainty about whether the relief will be meaningful enough to offset the broader tariff impact.

Also, two major sectors have so far been exempted from the proposed additional tariffs: pharmaceuticals and Electronics.

The actual impact depends on whether the US finalises these exemptions after the July 6, 2026 public comment period.

Until the tariffs are finalised, Indian exporters in pharma, electronics, and textiles should prepare for the possibility of the full 12.5% tariff applying.