US proposes 12.5% tariffs on 60 economies over forced labor

The US Trade Representative proposed tariffs of as much as 12.5% on imports from 60 economies Thursday, saying their failure to ban goods made with forced labor creates an uneven playing field for American workers.

"The failure of our most important trading partners to address the importation of goods made with forced labor is unacceptable," Ambassador Jamieson Greer, the US Trade Representative, said in a statement. "This creates a dynamic where American workers are forced to compete globally on an unlevel playing field."

The Section 301 investigation identified 54 economies — including India, China, Japan, Brazil, Australia, Saudi Arabia and the United Kingdom — that have neither imposed nor effectively enforced prohibitions on forced labor imports, making them eligible for the full 12.5% tariff. Six others, including Canada, Mexico, Indonesia and the European Union, have some restrictions but insufficient enforcement, facing a 10% duty. A separate mechanism for textile and apparel imports would allow limited quantities at lower rates.

The proposal, which remains open for public comment until July 6 with hearings scheduled for July 7, adds a new layer of complexity to US trade negotiations. For India — the US's largest trading partner with bilateral goods trade exceeding $120 billion — the dispute threatens to complicate ongoing talks on a broader trade agreement covering tariffs, market access and digital trade.

How the Tariff Structure Works

The USTR's proposed framework draws a distinction between economies that have taken some action and those that have not. Countries with existing prohibitions or commitments to address forced labor imports would face a 10% tariff surcharge. Those without such measures — the larger group of 54 — would see a 12.5% duty applied to their exports. The investigation, launched March 12, collected evidence from nearly 60 witnesses and more than 500 written submissions before reaching its determinations.

Market and Political Reaction

Former US Secretary of State Mike Pompeo commented on the development as investors parsed the potential for retaliatory measures from affected trading partners. The broad-based nature of the proposed tariffs — covering economies from Australia to Bangladesh — raises the risk of supply chain disruptions across multiple sectors, including textiles, electronics and manufactured goods.

The US argues that weak enforcement against forced labor allows cheaper production methods to undercut American companies that follow legal labor practices, and that products linked to exploitation can bypass restrictions through third countries and complex supply routes. The USTR's determination under Section 301 of the Trade Act of 1974 found the practices of the 60 named economies to be "unreasonable and burden or restrict US commerce."

The current average US tariff on industrial goods stands at roughly 2% after decades of trade liberalization, meaning a 12.5% surcharge would represent a significant escalation in effective trade barriers. The last time Washington deployed Section 301 tariffs at scale — against China in 2018 — bilateral trade in affected categories fell by roughly 25% within 12 months, according to Census Bureau data.

The final outcome, which could include tariffs, quotas or other trade restrictions, will be determined after the consultation period closes. For India and other major trading partners, the dispute adds urgency to ongoing bilateral negotiations as both sides seek to balance domestic priorities with the goal of deeper economic cooperation.

This article is for informational purposes only and does not constitute investment advice.