Last week, the US fired two salvos under Section 301 of the Trade Act, 1974 — the first, a trade investigation into excess capacities in 15 countries and the EU, which includes India; and the second, an inquiry into the use of ‘forced labour’ against 59 countries and the EU, again including India. As the US Congressional Research Service (CRS) report observes, the investigations have been initiated “following a Supreme Court decision on (reciprocal) tariffs imposed under the International Emergency Economic Powers Act”. With reciprocal tariffs being struck down, a new arsenal is being lined up with the same intent — reducing individual trade deficits.
Section 301 is likely to replace the existing 10-15 per cent tariffs in operation for five months under Section 122 of the same Act. Section 301 tariffs are reviewed after four years. If a country is indicted under a Section 301 inquiry, the US can impose tariffs or import curbs; suspend trade pact concessions; or force the other country to compensate the US. China has borne the brunt of Section 301 tariff actions. India has been targeted under ‘Special 301’ on intellectual property rights, and less so under the current provision.
However, there is a growing sense that the ruling on tariffs cannot be easily reversed. The US might have miscalculated by setting off Section 301 inquiries against countries that have entered into trade deals, such as Malaysia, Indonesia, Vietnam and Bangladesh. Malaysia has walked out on its deal with the US. Now, it would seem that countries or blocs which signed deals with the US are no better off than those that did not. Post the court order, a 10-15 per cent flat tariff applies to all, for now. In India’s case, the reciprocal tariff rate of 18 per cent ‘agreed’ under the Indo-US ‘interim framework’ deal, has been nullified.
Now, the possibilities are bewildering. Probes into forced labour and industrial capacity may lead to a return of punitive tariffs. The indictments under Section 301 give the US the power to retaliate in sectors that are not specific to the area of inquiry — and this is actually allowed under Article 22 of the WTO’s Dispute Settlement Understanding rules. The US perhaps believes that this may once again set off the old dynamic, of the world rushing back to the negotiation table. But countries are less likely to rush headlong into deals that may be upturned by the US on a whim. India should stick to its red lines on agriculture, data security and intellectual property, while agreeing to open up its goods sector, as it has done for other FTA partners. The joint statement allows for renegotiation if the circumstances change, as they indeed have. Geopolitical equations are fluid in the wake of the war. The Trump administration is under pressure not to destabilise US business and consumers, while the Congress too is keen to consider executive limits to the use of Section 301. India can afford to proceed calmly in its negotiations with US.
Published on March 15, 2026