Why is the U.S. investigating India? | Explained

The story so far

Over the last week, the U.S. government has launched two investigations against India and several other countries in a bid to find some form of actions or policies that “are unreasonable or discriminatory and burden or restrict U.S. commerce”. These investigations will likely take a few months, but could eventually result in the return of tariffs.

#### What is the current situation on tariffs?

The U.S. Supreme Court on February 20 ruled against the validity of U.S. President Donald Trump’s use of the International Emergency Economic Powers Act (IEEPA) to levy reciprocal tariffs on America’s trade partners. For India, these reciprocal tariffs had been 50% from August 2025 to February 6, 2026, after which Mr. Trump reduced them to 25%.

Following the court’s decision, Mr. Trump imposed a 10% tariff on imports from all countries for a period of 150 days under Section 122 of the Trade Act of 1974. He threatened to increase this to 15%, but has not done so.

However, he said the U.S. would use other sections of the Trade Act to levy additional tariffs.

#### What was the first investigation?

On March 11, the office of the U.S. Trade Representative (USTR) said it had initiated investigations against 16 economies, including India, to see whether these economies were using excess manufacturing capacity to export to the U.S. in a manner that was hurting American businesses.

The order for investigation under Section 301(b) of the Trade Act included specific allegations against the economies named — China, the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan, and India.

In India’s case, the U.S. said the country had a bilateral trade surplus with it of $58 billion in 2025. Indian government data, however, shows that India had a merchandise trade surplus of $42.2 billion with the U.S. over this period.

“India’s global goods trade surplus sectors include textiles, health, construction goods, and automotive goods,” the U.S. order said. “For example, evidence suggests the solar module sector is plagued by excess capacity, including that India’s current module manufacturing is nearly triple annual domestic demand.”

It added that India has created “significant excess capacity” in petrochemicals, steel, and other industries.

#### What is the second investigation about?

A day later, the USTR announced the launch of a fresh investigation, this time on 60 countries, including India. The fresh investigation was to look into whether these countries had taken “sufficient steps” to prohibit the import of goods produced with forced labour and how the “failure to eradicate” these practices impacts U.S. workers and businesses.

This investigation, too, was under Section 301(b) of the Trade Act of 1974.

#### Why is Section 301(b) significant?

Section 301 of the Trade Act of 1974 is aimed at addressing unfair foreign practices affecting U.S. businesses. Notably, according to the website of the USTR, “Section 301 may be used to respond to unjustifiable, unreasonable, or discriminatory foreign government practices that burden or restrict U.S. commerce”.

According to trade and industry experts, this “response” that has been allowed in the law is the pathway through which the Trump administration could once again levy tariffs on imports from other countries once the 150-day window for his current 10% expires.

“While its [the investigation’s] impact on India’s exports will be clear only after the investigation concludes, it seems the move is aimed at imposing a new tariff once the 150 days for the 10% global tariff expires,” Pankaj Chadha, chairman of the Engineering Exports Promotion Council of India, said.

#### How did the Indian government respond?

So far, it has not responded publicly. In contrast, the European Union has already spoken strongly about it.

“We will be seeking further clarity from the U.S. on how the opening of this section 301 investigation would interact with” the EU-U.S. agreement signed last year, European Commission spokesman Olof Gill said.“The commission would respond firmly and proportionately to any breach of the joint statement commitments,” he added.

#### How have Indian industries responded?

Mr. Chadha said that this fresh development comes over and above the existing tariffs that the steel, aluminium, auto, and auto components sectors still have to pay. The U.S. has implemented a separate 50% tariff on the import of these goods, including from India, which continues even after the Supreme Court’s order.

Similarly, the Confederation of Indian Textile Industry has said that the recent developments add further uncertainty to the textiles and apparel sector, which it said is already under significant stress due to the developments in West Asia and a lack of clarity over how the U.S. tariff situation will unfold.

Ravi Sam, the Vice Chairman of industry body Texprocil, however, said there is no need for panic as these investigations will be long, drawn-out processes and will not have any immediate impact. This sentiment was echoed by trade expert and former Director General of Foreign Trade Ajay Srivastava as well.

Published - March 15, 2026 10:38 pm IST

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