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By: Manoj Mishra
15 Jun 20269 min read
That shift has become particularly visible in the latest round of trade enforcement action. On 2 June 2026, the Office of the United States Trade Representative announced findings in a series of Section 301 investigations into 60 economies, concluding that failures to prohibit or effectively enforce restrictions on the importation of goods produced with forced labour constitute actionable unfair trade practices. In response, the USTR proposed additional duties of 10 per cent or 12.5 per cent, depending on the legal framework and enforcement posture of the country concerned. India is among the economies potentially exposed to the higher rate under the proposal.
These developments coincide with reports that India and the United States are advancing negotiations on a broader bilateral trade arrangement. Recent statements indicate that both sides have reaffirmed their commitment to concluding a mutually beneficial agreement, even as the US simultaneously pursues fresh tariff action on labour-enforcement grounds. This juxtaposition is revealing. It suggests that future US trade engagement will increasingly combine strategic partnership with assertive, issue-specific enforcement.
The emerging picture is therefore not one of retreat, but of recalibration. The United States appears to be moving away from broad emergency tariffs that rest on contested legal foundations and toward narrower, more procedurally structured, and more strategically durable tools. Tariffs are increasingly being integrated with industrial policy, labour standards, supply-chain regulation, ESG expectations and geopolitical priorities.
The legal turning point came earlier this year when the US Supreme Court held that the International Emergency Economic Powers Act does not authorise the President to impose tariffs. In doing so, the Court invalidated the reciprocal and trafficking tariffs that had been justified on emergency grounds and reaffirmed a foundational constitutional principle: tariff-setting power lies with Congress, and any delegation of that authority must be expressed clearly.
That scrutiny soon extended to Section 122 of the Trade Act of 1974. In May 2026, the US Court of International Trade ruled that the administration’s 10 per cent global tariff imposed under Section 122 exceeded the statutory conditions required to invoke that provision. The court held that Section 122, a temporary safeguard designed for serious balance-of-payments problems, was not intended to support a broad import surcharge based on structural trade imbalances. Although the US Court of Appeals for the Federal Circuit subsequently granted a stay while the appeal proceeds, the decision underscored a broader judicial message: residual or emergency provisions cannot be stretched indefinitely to justify sweeping tariff action without clear legislative backing.
These rulings do not signify the end of aggressive trade intervention. Rather, they are likely to accelerate a move toward other statutory mechanisms that are more resilient to judicial review and more adaptable to long-term strategic use.
The larger policy trajectory in Washington remains intact. Across party lines, tariffs and industrial policy have become central instruments of economic statecraft. Concerns over Chinese industrial overcapacity, semiconductor dependence, critical minerals, clean-energy supply chains, advanced technologies and strategic vulnerabilities have fundamentally reshaped the US trade discourse. Trade measures are no longer seen merely as revenue tools or conventional trade remedies. They are increasingly deployed to influence supply chains, support domestic manufacturing, reduce strategic dependence and reinforce national resilience.
In that context, the courts may narrow the executive branch’s ability to use emergency statutes, but they are unlikely to alter the strategic logic driving US trade policy. The more probable outcome is a transition from blunt, economy-wide measures to narrower instruments that are legally more robust and politically easier to defend.
That transition is already underway. Following the setbacks to emergency tariff authorities, the administration appears to be relying more heavily on Section 301 and Section 232—two mechanisms that offer firmer procedural footing and broader strategic flexibility.
Section 301 empowers the USTR to investigate acts, policies and practices that are unreasonable or discriminatory and burden or restrict US commerce. Crucially, it does so through a structured process involving investigation, consultation, public submissions, hearings and reasoned findings. That administrative record gives Section 301 measures greater resilience in court than tariffs imposed under general emergency powers.
The June 2026 forced-labour investigations illustrate how far this authority may now extend. The USTR concluded that failures by 60 economies to prohibit or effectively enforce restrictions on the importation of goods produced with forced labour amount to unfair trade practices actionable under Section 301. This is significant not only because of the proposed tariff rates, but because it expands the operative meaning of “unfair trade practices” beyond traditional categories such as subsidies, dumping or market-access barriers.
Labour standards, supply-chain traceability and regulatory enforcement are increasingly being drawn into the trade-policy perimeter.
This marks an important conceptual shift. US trade enforcement is evolving from conventional border protection toward broader regulatory leverage. Tariffs are no longer being used only to correct price distortions or retaliate against market barriers; they are also becoming tools to influence governance outcomes, sourcing discipline and compliance behaviour in third-country supply chains.
The proposed Section 301 measures also reflect the growing intersection between trade law and forced-labour regulation in the United States. In recent years, Washington has expanded its enforcement architecture through the Uyghur Forced Labor Prevention Act, more assertive Customs and Border Protection action, supply-chain tracing expectations and detention-based import enforcement. The result is a compliance environment in which origin and tariff classification are no longer sufficient. Increasingly, businesses must also demonstrate how products were made, by whom, from which inputs, and under what labour conditions.
For Indian exporters, this is a material shift. Sectors with complex supply chains, subcontracting arrangements, imported raw materials or labour-intensive production processes are likely to face heightened scrutiny. Documentation around supplier onboarding, labour practices, sourcing integrity, raw material traceability and internal governance may become as important as tariff optimisation itself. Exporters to the US may therefore need to invest significantly in supply-chain mapping, audit trails and ESG-linked compliance systems to preserve market access and reassure US buyers.
Alongside Section 301, the United States continues to expand tariff action under Section 232 on national security grounds. The significance of Section 232 lies not only in its legal durability, but also in the breadth of its interpretive scope. National security is no longer confined to conventional defence-related sectors. It now encompasses steel, aluminium, copper, semiconductors, pharmaceuticals, electric vehicles, batteries, critical minerals and clean-energy technologies. This broader framing gives the administration considerable flexibility to align tariff measures with industrial policy and strategic competition.
The likely consequence is that future US trade restrictions may be narrower in legal design but wider in strategic effect. Rather than one-size-fits-all tariffs, Washington may increasingly target sectors, products and supply chains that it regards as economically or geopolitically sensitive.
For India, the present moment is unusually consequential. On the one hand, India and the United States are pursuing closer economic and strategic ties, and recent rounds of negotiation suggest continued momentum toward a bilateral trade arrangement. On the other hand, the proposed Section 301 tariffs show that a stronger bilateral partnership does not insulate Indian exports from US enforcement action.
This duality should not be underestimated. It reflects the reality that modern US trade policy is increasingly layered: cooperative in strategic alignment, but uncompromising in enforcement. Even where trade negotiations advance, Washington may continue to reserve the right to impose additional sector-specific or policy-linked tariffs under separate statutory authorities.
For India, the implications are both immediate and structural. If implemented, the proposed measures could raise landed costs for affected exports and weaken competitiveness in sectors such as aluminium, cotton, seafood, coffee and rice. But the more enduring consequence lies in the compliance burden. US importers, regulators and customs authorities are likely to expect greater transparency on sourcing and labour conditions, even in sectors where India has traditionally not faced sustained scrutiny on those issues.
India should therefore treat these investigations not merely as tariff disputes, but as indicators of a deeper policy realignment.
Traditional market-access negotiations will increasingly intersect with labour standards, supply-chain security, sustainability frameworks and industrial policy. This also suggests that in ongoing bilateral trade discussions, India may need to seek greater clarity on the treatment of future Section 301 or Section 232 actions so that tariff commitments negotiated under a bilateral arrangement are not undermined by parallel enforcement measures.
At the same time, the changing landscape also creates opportunity. The continued push by multinational businesses to diversify away from China-centric supply chains may work in India’s favour. India’s manufacturing ambitions, geopolitical alignment with the United States, infrastructure investments and production-linked incentive schemes all improve its positioning as an alternative sourcing destination.
But the opportunity comes with conditions. Businesses hoping to benefit from China+1 diversification will not succeed merely by rerouting goods or relying on minimal processing strategies. Those models are becoming harder to sustain in a world where customs enforcement, origin verification, labour compliance and supply-chain traceability are becoming central to market access. Competitive advantage will increasingly depend not only on cost or capacity, but also on the credibility of compliance systems.
Conclusion
The recent judicial invalidation of certain emergency-based tariffs is an important constitutional and legal development in US trade law. But it should not be mistaken for a retreat from protectionism. The United States is not abandoning tariff-driven trade policy; it is redesigning it.
The next phase of US trade enforcement is likely to be more targeted, more procedurally grounded and more tightly linked to industrial policy, labour regulation, supply-chain governance and geopolitical strategy. For India, this presents a mixed picture: deeper strategic engagement and new supply-chain opportunities on the one hand, and heightened regulatory scrutiny and trade risk on the other.
In this environment, tariff planning alone will no longer be enough. Indian businesses will increasingly need to navigate the broader intersection of trade law, industrial policy, labour compliance, ESG expectations and geopolitical risk. That is the terrain on which the future of India–US trade will increasingly be shaped.
Dipika Shetye, Associate Director, Tax, Grant Thornton Bharat, has also contributed to this article.
This article first appeared in the Taxmann on 15 June 2026.
The June 2026 edition of the Grant Thornton Bharat Monthly Tax Bulletin provides a concise summary of key developments in direct taxes, FEMA, transfer pricing, and indirect taxes for May 2026.
Most accounting standards change processes. Some change disclosures. A few quietly change the conversation. I believe Ind AS 118 belongs in the third category.
Today’s environment is undeniably difficult. Supply chains are fragmented, costs remain volatile, capital is expensive and geopolitical risk has become structural rather than episodic.
