The Indian government on Saturday said the United States' decision to place India in the lower 10% additional tariff category under its Section 301 action offers Indian exporters a comparatively favourable position against several other economies.

The announcement came after the United States Trade Representative (USTR) finalised measures following an investigation into the policies and practices of 60 economies concerning imports linked to forced labour. Under the final decision announced on July 23, Indian goods covered by the measure will face an additional 10% import duty from July 24.

The final rate is lower than the 12.5% tariff initially proposed for India. It also replaces the temporary 10% additional duty that had been in effect for 150 days beginning February 24.

The Ministry of Commerce said Indian authorities had remained in regular contact with the USTR during the investigation. The engagement included written representations, direct consultations and participation in public hearings.

According to the ministry, these efforts helped India secure a position in the lower tariff category. It said this would provide Indian exports with a relative advantage in important sectors compared with countries facing higher additional duties.

A significant portion of India's exports to the US will also avoid the new levy. The ministry said goods worth a substantial share of India's USD 87.31 billion exports to the American market in 2025-26 will not come under the additional 10% Section 301 duty. Generic medicines, smartphones and certain other products that currently carry no additional duty are among those outside its scope.

The government also clarified that products already subject to US Section 232 tariffs will not face the fresh Section 301 charge. This includes categories such as steel, aluminium and auto parts.

The Global Trade Research Initiative (GTRI) estimates that these products represent roughly 8% of India's exports to the US and are already subject to additional tariffs of either 25% or 50%, apart from standard Most Favoured Nation (MFN) duties.

Taking the exemptions into account, the Commerce Ministry estimated that around 45% of India's exports to the US will remain unaffected by the additional 10% Section 301 tariff. The remaining 55% will be subject to the new levy.

Despite the additional duty, the government maintained that India's effective tariff burden remains relatively favourable compared with that faced by many other economies covered by the US investigation.

The Centre also reiterated its intention to pursue an early conclusion of the India-US Bilateral Trade Agreement (BTA). The ministry said negotiations would continue in line with the commitments announced in February 2026 and the subsequent joint statement issued by the two countries.

Textile Industry Raises Red Flags

The textile and apparel industry, however, has expressed concern over India's position under the new tariff framework.

The Commerce Ministry said a proposed textile-specific mechanism referred to in the final Section 301 measures has not yet been implemented. It added that discussions with Washington on the issue are continuing as part of the broader BTA negotiations.

Industry representatives have highlighted that India has not been granted the textile and apparel tariff-rate quota (TRQ) arrangement extended to Bangladesh, Cambodia, Indonesia and Malaysia. The mechanism allows specified quantities of textile and apparel products made using US-origin cotton and fibre to enter the American market at preferential duty rates.

The arrangement is initially set to remain available to the four countries for three years. Under the system, manufacturers in these markets can source cotton and textile inputs from the US before completing production and exporting the finished products to America.

The development could have implications for India's textile industry, particularly because Bangladesh is a major competitor in the global apparel market and also sources considerable quantities of cotton and fibre from India. The new preferential arrangement may encourage Bangladeshi manufacturers to increase their direct purchases of US-origin raw materials.

The Confederation of Indian Textile Industry (CITI) has voiced concern over the additional US duty, warning that its impact could extend beyond finished goods and affect India's exports of intermediate textile products to other markets.

The US is India's largest individual destination for textile and apparel exports, with annual shipments generally estimated at around USD 11 billion.

Earlier in February, Commerce and Industry Minister Piyush Goyal had indicated that India was hopeful of securing preferential access for garments manufactured with American cotton and yarn through the proposed trade agreement. Such benefits are already available to Bangladesh under the new arrangement.

How the New 10% Duty Works

The additional tariff is imposed on top of the existing MFN import duty applicable to goods entering the US.

For instance, an Indian-made product that previously attracted a 5% US import duty would now face a combined tariff of 15% if it falls within the scope of the new Section 301 measure.

Why India Received the Lower Tariff Category

The US launched Section 301 investigations in March covering several economies, including India, over concerns relating to forced labour and excess industrial capacity.

By June, Washington had proposed an additional 12.5% duty for India and 53 other economies over allegations that they had not taken sufficient measures to prevent the import of goods produced using forced labour. A lower 10% rate had initially been proposed for six other regions, including Pakistan and the European Union.

India subsequently amended its Foreign Trade Policy in July to prohibit imports of products made using forced labour. The US took note of the policy change before placing India in the lower 10% tariff category in its final decision.

Separate US Investigation Still Awaited

A second Section 301 investigation concerning excess industrial capacity is yet to be concluded by Washington.

GTRI has suggested that the outcome of this separate probe could be announced by the Trump administration later and may potentially lead to additional tariffs covering a broad range of industrial products.

India-US Trade Talks Continue

The latest tariff decision comes as New Delhi and Washington continue negotiations on a bilateral trade agreement. The two sides have already reached a framework for the first stage of the proposed pact.

India's negotiating strategy is focused on securing tariff conditions that give its exporters a competitive advantage over rival economies in the US market. The latest Section 301 decision, along with the continuing BTA discussions, is therefore expected to remain an important factor in India's trade strategy with Washington.