The United States proposed a 12.5% [1] tariff on imports from India on June 3, 2026, citing concerns over forced labour.

This development creates a significant diplomatic hurdle for two nations attempting to finalize a comprehensive trade agreement. The threat of new tariffs could derail a deal that officials previously described as nearly complete.

According to reports, India is among approximately 60 [1] economies that the U.S. said have not sufficiently curbed the import of goods produced using forced labour. The proposed tariff is intended to pressure these nations to implement stricter labour standards.

Bilateral trade negotiations are currently taking place in New Delhi. The timing of the tariff proposal is particularly sensitive because the two sides have been working to resolve the remaining details of a trade pact.

There is a discrepancy regarding the current status of these negotiations. Reuters said that the proposed tariff threatens to complicate the ongoing talks [1]. However, officials speaking with CNBC TV18 said that only 1% [2] of the deal remains, with only the "commas and full stops" left to be finalized [2].

If the 12.5% [1] tariff is implemented, it would likely affect a wide range of Indian exports to the U.S. market. This could lead to retaliatory measures from New Delhi, further straining the economic relationship between the two partners.

“The United States proposed a 12.5% tariff on imports from India over forced labour.”

The contradiction between the U.S. tariff threat and the reported near-completion of the trade deal suggests a disconnect between trade negotiators and labor policy enforcers. While diplomatic channels may have reached a technical agreement, the U.S. is using economic leverage to force India to align with international forced-labour standards, potentially using the trade pact as a bargaining chip.