Washington: On Friday, the 10% tariff that has applied to most goods India ships to the US since February expires. It was always meant to. The measure was temporary by statute, a stop-gap improvised after the US Supreme Court demolished the legal basis of Donald Trump’s original tariff regime.
Event Context
Indian goods entering the United States currently attract a 10% tariff imposed under Section 122 of the Trade Act of 1974, which permits the president to levy temporary duties to correct a fundamental balance-of-payments problem. It is paid on top of the most-favoured-nation rates every US trading partner pays, which vary by product.
Two categories carry heavier duties. Steel, aluminium and core metal articles face 50%, and automobiles and auto parts 25%, both under Section 232 of the Trade Expansion Act of 1962. Neither is affected by Friday’s expiry.
But there are some that escape the additional tariff altogether.
Exemptions established under Executive Order 14257 and widened by a White House clarification in April 2025 cover electronics — smartphones, laptops, data processing machines, semiconductor devices and integrated circuits — along with pharmaceuticals, energy products and critical minerals. These are among India’s largest export lines. Smartphones alone were worth $10.9 billion in 2024-25 and pharmaceuticals $9.8 billion, against total merchandise exports to the US of $86.51 billion that year. On the reckoning at the time, the exempted categories accounted for close to half of everything India sells to the American market.
Trump on Tuesday said in a social media post that generic drugs will continue to enter at zero tariff from August 1 for two years, before rising to 100% for a year and 200% after that, a schedule he cast as a penalty on manufacturers that decline to build production in the US.
India and the US reached a framework agreement on February 7 that would have cut the tariff on Indian goods from 50% to 18%, removing along the way a 25% penalty imposed over India’s Russian oil purchases. In return, New Delhi signalled an intention to buy $500 billion of American goods — the commitment was non-specific, as was the period over which it would be met — and to open its market further to US exports, including limited agricultural products.
Commerce minister Piyush Goyal has been explicit about why India accepted those terms: at 18%, Indian exporters would enjoy an advantage over competitors such as China, Indonesia, Vietnam, Bangladesh, and Sri Lanka. He returned to the point after the most recent round of talks, and it remains the axis on which New Delhi’s position turns.
Whether the Section 301 tariffs arrive before Friday, after it, or alongside the expiring measure remains unsettled.
An extension would need Congress approval, which would mean asking lawmakers to prolong a tariff a US court has already ruled unlawful. The Court of International Trade found that the proclamation invoking Section 122 never asserted the balance-of-payments problem the statute requires. Its ruling covered only the companies that filed the case, which has meant the ruling did not strike down the whole basis, but it nonetheless puts it on shaky ground.
Player Focus
“I think the two sides are very close to agreement on the substance of the interim agreement, but they may be stuck on India’s insistence that it have clarity first that it will receive a preferential tariff compared to other countries,” said Mark Linscott, senior advisor at the Asia Group and a former assistant US trade representative for South and Central Asia, who handled negotiations with India in that role. “Some of those, such as Pakistan, Sri Lanka, and the Philippines, are not subject to the excess capacity 301, so it is hard to see how they might have a higher aggregate tariff than India, at least until new 301 cases that include them are initiated.”
Team Analysis
A key legal basis of that framework lasted briefly. On February 20 the US Supreme Court struck down Trump’s use of emergency economic powers to impose tariffs, taking the 18% rate for India, and the higher levies for its rivals, down with it. The framework anticipated something of the sort. Its text provides that “in the event of any changes to the agreed upon tariffs of either country, the United States and India agree that the other country may modify its commitments” — the clause New Delhi has leaned on ever since.
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The administration’s answer is Section 301 of the same 1974 statute, which allows the US to retaliate against trading partners it finds to be engaging in unfair or discriminatory practices. Unlike Section 122 it carries no rate ceiling and no expiry date, but it requires a formal investigation first.
Two are open against India. One examines the use of forced labour in Indian products, and in early June, Washington proposed an additional 12.5% duty on that basis. India rejected the finding. The second, into excess manufacturing capacity, is still pending.
This is where the tariff math becomes complicated: Pakistan, Sri Lanka and the Philippines are subject only to the forced-labour investigation.
Two recent precedents indicate the range of options the Trump administration is considering. Brazil emerged from a concluded Section 301 investigation with a 25% tariff. Canada was hit this week with 50% duties on selected goods, effective next month, under Section 338 of the Tariff Act of 1930 — a dormant provision permitting the president to punish discriminatory treatment of American commerce, applied without investigation and outside the terms of an existing trade agreement.
A sharper threat is legislative. A bill introduced in the US Senate would impose tariffs of up to 100% on the five largest purchasers of Russian oil and natural gas, with the aim of choking off the revenue funding Moscow’s war in Ukraine. Its sponsors named India explicitly among the five. They want it passed by the end of July. It carries a presidential waiver, and faces resistance in the House of Representatives from members reluctant to hand the administration still more tariff authority.
Crucially, Washington itself had earlier permitted these purchases through a temporary waiver, easing an energy crisis its own actions in West Asia had a hand in creating when the Strait of Hormuz was choked. That waiver has since lapsed.
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Match Outlook
The expiry is not India’s alone. The same 10% applies to most of America’s trading partners, and they are waiting on the same answer. In India’s case, Washington has two investigations open against it that could produce a replacement tariff. An interim trade agreement that would settle the question is close but unsigned. And a bill moving through the US Senate would authorise a levy of up to 100% on Indian goods over an entirely separate matter — the country’s purchases of Russian oil.
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If both Indian cases produce tariffs, the advantage the February framework was designed to secure could be under threat.
“It’s hard to tell. I expect that the 301 tariffs for forced labor will be applied by July 24, but there could be a short delay. We’ll know by the end of next week and even in the next few days,” Linscott said. “I’m sceptical that there will be any earnest effort to seek congressional extension, particularly as the 301 tariffs get rolled out.”
Four outcomes are live. Indian goods could revert to most-favoured-nation rates alone, with no additional tariff — the least likely, given the administration’s evident intent to maintain leverage.
The 10% could be extended, which needs the Congress. Section 301 tariffs could replace it, at a rate the investigations have yet to fix. Or Washington could reach for a different instrument altogether, as it has just done with Canada.
Linscott expects the third.
“Until the interim agreement is concluded and signed, I don’t think we’ll see the 18% tariff. We could have a period of much higher tariffs combining the 12.5% on forced labor and an additional tariff for excess capacity. I wouldn’t be surprised to see that at 30% or more,” he said. “This suggests some urgency is needed to conclude the interim agreement.”
Which returns the matter to the negotiating table, where it has sat since February — with one fewer deadline left to miss.
