India–US Trade Agreement: Proposed Tariff Safeguards, Section 301 Investigation and Sensitive Sectors

The news

American negotiators have assured India of a comparative advantage over its rivals under the proposed bilateral trade deal, a senior Indian government official said on Friday. The official said the legal text of the agreement will also include provisions to ensure that the US does not impose additional tariffs after the deal is signed. The first tranche of the agreement, which is under negotiation, will not cover services.

The last round of talks was held during the first week of November, when negotiators resolved several portions of the customs and trade facilitation chapter, the official added. The US midterm elections, held on November 3, saw tariffs, inflation and the economy emerge as key issues. Responding to a question on the possibility of future tariffs on India, the official said India reserves the right to modify concessions if a future US tariff goes beyond commitments. The final US tariff structure is expected to become clearer after the United States Trade Representative releases the findings of its second Section 301 investigation into industrial overcapacity. India is among 14 countries, including Australia, Japan and the European Union, that have acknowledged that structural excess capacity poses significant challenges for all trading partners.

The US had imposed 10% tariffs on India in June, lower than the 12.5% rate proposed in March, after the Directorate General of Foreign Trade announced a prohibition on imports of goods produced using forced labour. Commerce and Industry Minister Piyush Goyal said on November 3 that India will not allow imports of genetically modified products or dairy products produced using calf meat. The US has been pushing for exports of GM products under the trade deal and has described India’s requirements for dairy imports as non-tariff barriers.

What is the US Section 301 investigation provision?

Section 301 of the US Trade Act of 1974 grants the United States Trade Representative the authority to investigate foreign trade practices that may be unfair or discriminatory and to impose trade sanctions. The provision was significantly amended by the Omnibus Trade and Competitiveness Act of 1988, which transferred the authority to determine violations and impose remedies from the President to the USTR. A landmark World Trade Organization dispute settlement case, United States – Sections 301-310 of the Trade Act of 1974 (DS152), was brought by the European Communities in 1998, with the panel ruling that while the US law was not inconsistent with WTO rules on its face, it could only be applied in a manner consistent with WTO obligations. The first Section 301 investigation concerned imports of goods produced using forced labour.

What tariff safeguard is India seeking?

India seeks to reserve the right to modify concessions if future US tariffs exceed commitments made in the agreement. The official said the legal text will include provisions to prevent the US from imposing additional tariffs after the deal is signed. The final wording of such a safeguard will determine its scope and enforceability.

Which sectors are sensitive for India?

India has expressed sensitivity about opening its dairy sector and allowing genetically modified products. Commerce Minister Piyush Goyal said India has never allowed imports of GM products or dairy products produced using calf meat, and will not do so in the future. The US has cited Indian regulations restricting dairy imports as non-tariff barriers, describing them as 'onerous' in its March 2025 report.

What is the Section 301 investigation about?

The second US Section 301 investigation concerns industrial overcapacity, a situation where production capacity exceeds market demand. India expects favourable treatment in the investigation and is among 14 countries that have acknowledged the challenges posed by structural excess capacity. The findings, expected after the midterm elections, could revive the tariff architecture the Trump administration had been planning since early 2025.