U.S. Retains 10% Tariff On Indian Goods, Replacing Temporary Levy With Long-Term Duty

The United States has imposed a new 10% tariff on a wide range of Indian goods under Section 301 of the U.S. Trade Act of 1974, replacing the temporary surcharge that expired at 12:01 a.m. Washington time on July 24. Although the headline tariff remains unchanged, the latest measure does not carry a fixed expiry date, making it a more enduring trade barrier.

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The previous 10% levy had been imposed under Section 122 of U.S. trade law and was subject to a statutory 150-day limit. With its expiration, the Section 301 tariff came into effect immediately, ensuring there was no gap in the application of the duty.

New Tariff Has No Automatic Expiry

Unlike the earlier surcharge, the Section 301 tariff will remain in force unless the Office of the United States Trade Representative (USTR) decides to review, amend or withdraw it. The final order does not specify any timeline for its removal.

The new tariff is also an additional duty. In most cases, it is applied over and above the normal U.S. most-favoured-nation (MFN) tariff. For example, a product that normally attracts a 5% MFN duty would generally face a combined tariff of 15%, unless it falls under an exempt category.

For Indian exporters, this means that while the tariff rate has not increased overnight, the expectation that the temporary surcharge would lapse has not materialised.

India Avoids Higher Tariff Tier

According to the USTR, India was placed in the 10% tariff category after the country adopted measures to prohibit imports produced wholly or partly through forced labour.

The Directorate General of Foreign Trade (DGFT) issued a notification on July 13 empowering the government to ban such imports. The rule is scheduled to come into effect 30 days after its notification.

Countries that did not adopt similar measures or provide comparable commitments were placed in the higher 12.5% tariff category. As a result, India received a lower rate than countries such as China and Vietnam but was not exempt from the tariff.

Competitive Position Remains Mixed

The 10% tariff gives India a lower headline rate than exporters facing the 12.5% duty. However, Bangladesh, Pakistan and Sri Lanka are also subject to the same 10% rate, limiting India’s advantage in sectors such as garments.

The USTR has also proposed three-year tariff-rate quotas for textile and apparel exports from Bangladesh, Cambodia, Indonesia and Malaysia, linked to purchases of U.S. cotton and textile inputs. India is not part of this arrangement, meaning eligible exporters from those countries could gain an advantage once the mechanism becomes operational.

In addition, the combined tariff burden for the European Union and Taiwan is capped at 10%, while India’s Section 301 tariff is generally added to the applicable MFN duty.

Trade Outlook

According to data from the U.S. Census Bureau, the United States imported goods worth $103.8 billion from India in calendar year 2025. However, not all exports fall within the scope of the new measure. Smartphones, several pharmaceutical products, petroleum products, selected agricultural goods and products already covered under Section 232 duties are exempt.

The tariff also comes as India and the U.S. continue discussions on a proposed bilateral trade agreement. Reuters reported on July 22, citing a senior U.S. official, that negotiations were nearing completion and an agreement could be signed within three to four months. While the forced-labour investigation has concluded, a separate U.S. investigation into manufacturing overcapacity remains underway and could result in additional trade measures.