India may wait for clarity on Section 301 probe before moving ahead with US trade talks

The probe was initiated by the Office of the US Trade Representative (USTR) under Section 301 of the US Trade Act of 1974, a provision that allows Washington to investigate and respond to foreign practices it believes harm US commerce.

• US initiates Section 301 probe, impacting India trade deal talks
• Talks may progress after clarity on US policy approach
• Probe targets sectors like steel, autos, and electronics

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The US’ decision to initiate action under Section 301 of its trade law could alter the dynamics of ongoing negotiations for an interim trade deal with India, with talks likely to move forward once there is clarity on Washington’s policy approach, a government source said.

“It is there, the decision on Section 301. Obviously, it changes things,” the source said. “Even if they feel they have a deal, they will still want to get the upper hand. It’s about reclaiming leverage.”

“We are working out the modalities on the trade deal. When there is clarity, we will move forward.”

Another hurdle

India and the United States are negotiating an interim bilateral trade agreement to ease tariff tensions and expanding market access.

In early February, the two countries issued a joint statement, outlining a framework for the proposed pact, reaffirming commitment to work toward a broader bilateral trade agreement (BTA).

The US agreed to reduce tariffs on Indian exports to 18 percent, while New Delhi would lower or eliminate duties on several American industrial goods and some relatively minor agricultural products as part of reciprocal market access commitments.

India did not agree to allow access for US dairy products and most of its agricultural market remains off limits.

The sectors in which in which imports have been allowed are those in which imports were already taking place.

The trade pacts with the UK and the EU are largely along similar lines, with dairy and most of the agriculture sector off-limits.

The interim arrangement with the US is intended as the first phase of a wider trade deal between the two countries.

SCOTUS blow

Talks had already slowed last month. A planned round of negotiations in Washington late in February was puts off after the US Supreme Court struck down the use of the International Emergency Economic Powers Act (IEEPA) for slapping tariffs.

The decision prompted the Trump administration to reassess its tariff strategy. It subsequently introduced a temporary tariff, set at 10 percent, with plans to raise it to 15 percent on some imports.

On March 12, the United States launched a fresh investigation into global industrial overcapacity, targeting manufacturing sectors across 16 economies, including India.

The move is seen as laying the groundwork for a more durable tariff framework once the temporary Section 122 measures expire.

The probe was initiated by the Office of the US Trade Representative (USTR) under Section 301 of the US Trade Act of 1974, a provision that allows Washington to investigate and respond to foreign practices it believes harm American commerce.

The investigation focuses on what the USTR describes as “structural excess capacity”—situations where government policies encourage industries to expand production beyond domestic demand, often leading to export surges in global markets.

Such policies may include subsidies, incentives, preferential financing or other forms of state support that allow firms to sustain production levels that would otherwise be uneconomical, the notice said.

The sectors identified in the probe span steel and aluminium, batteries, automobiles, semiconductors, electronics, solar equipment, chemicals, plastics, machinery and shipbuilding.

The USTR will invite public comments and hold hearings before determining whether the policies under review burden or restrict US commerce. If such a finding is made, the Trump government can impose trade remedies such as tariffs or other restrictions on imports.