At the centre of the dispute is Section 301 of the US Trade Act, a law the Trump administration is using to impose tariffs on nearly 60 trading partners. A coalition of 25 US states has sued the administration, arguing that the President has exceeded his authority by using Section 301 to reimpose tariffs after courts had earlier ruled against his use of a different law to levy broad duties.
The case comes at a crucial time for India. New Delhi and Washington are in the final stages of negotiating a bilateral trade agreement, while Indian exports are already facing a 10% US tariff under the latest measures.
Former Commerce Secretary Ajay Dua and former Ambassador to the World Trade Organization (WTO) Jayant Dasgupta told CNBC-TV18 that the lawsuit adds another layer of uncertainty to the negotiations and strengthens the case for India to avoid rushing into an interim trade deal.
What is Section 301?
Section 301 of the US Trade Act allows the US government to investigate foreign trade practices that it considers unfair and, after following a prescribed process, impose tariffs or other trade restrictions. Investigations are typically conducted by the Office of the United States Trade Representative (USTR), which invites public comments before recommending action.
The provision has long been used by successive US administrations to address trade disputes. However, its latest use has come under legal scrutiny because critics argue the Trump administration is relying on it to impose sweeping tariffs on a large number of countries.
Earlier this year, US courts ruled that the administration could not use the International Emergency Economic Powers Act (IEEPA) to impose broad tariffs. The latest measures under Section 301 have therefore triggered a fresh legal challenge.
Why are the new US tariffs being challenged?
The Trump administration has imposed tariffs ranging from 10% to 12.5% on nearly 60 countries and the European Union under Section 301. Together, these economies account for more than 99% of US imports.
The lawsuit argues that the administration is effectively trying to achieve through Section 301 what it could no longer do under the IEEPA after the courts curtailed those powers. It also contends that forced labour concerns are being used to justify broad-based tariffs without adequately demonstrating how those duties would address the problem.
The White House has rejected those claims, maintaining that it is acting within powers granted under US trade law to protect American commercial interests.
Why does Section 301 matter?
According to Dasgupta, the legal question before the courts is different from the one that arose under the IEEPA.
“The way Section 301 is constructed, it gives the President wide authority to impose tariffs after going through due process,” he said.
He noted that the USTR appears to have followed the prescribed process by conducting investigations and inviting public comments before announcing the tariffs.
Because of that, he believes the administration has a stronger legal foundation than it did under the IEEPA. At the same time, he said the courts will ultimately have to decide whether those powers have been exercised appropriately.
Why do some experts believe Trump could face a difficult legal test?
Dua argued that the timing and scope of the tariffs could become central to the court’s assessment.
He pointed out that the administration announced the new tariffs just before its earlier temporary tariff authority expired.
“The fact of the matter is that the 60 countries chosen, along with the European Union, account for virtually the entire set of US imports,” Dua said.
He also questioned whether the administration had adequately justified using forced labour as the basis for imposing tariffs across such a large group of countries.
According to Dua, if forced labour is the stated objective, the administration should also have explained how the tariffs would help eliminate or reduce forced labour in those jurisdictions.
He further argued that the economic impact on American consumers and businesses could also come under scrutiny because tariffs are ultimately paid by US importers rather than foreign exporters.
Could the legal challenge affect India’s trade talks?
Both former officials believe it could.
India and the US are negotiating a bilateral trade agreement, but both experts said the uncertainty surrounding Section 301 makes this a poor time to conclude even an interim deal.
“I think India should wait,” Dua said.
He argued that signing an interim agreement before the legal position becomes clear could leave India exposed if Section 301 tariffs continue to override agreed tariff commitments.
Dasgupta reached a similar conclusion.
“Yes, that is a real fear, and I agree entirely with Ajay Dua that we should wait for the verdict,” he said.
He noted that the case could eventually move from the US Court of International Trade to the Federal Court of Appeals and ultimately the Supreme Court, a process that could take close to a year if it runs its full course.
Why are experts not convinced India needs to rush?
Dasgupta said India’s negotiating position has not materially worsened compared with other exporting nations.
At present, India faces a 10% tariff, but so do exporters from countries accounting for almost the entire US import market.
He argued that India should focus on securing reciprocal market access rather than accepting an interim arrangement.
According to him, India has consistently maintained two priorities in the negotiations. First, any agreement must involve reciprocity, with both countries offering improved market access. Second, India wants to ensure it receives tariff treatment that is at least as favourable as competing exporters in Asia and other regions.
“What, then, is the urgency in accepting or signing an interim trade deal before the Section 301 issue comes under judicial scrutiny?” Dasgupta said.
Can India’s exports withstand the current tariffs?
Dua believes they can.
He said India has previously managed periods of higher tariff barriers and that exports should remain resilient under the current 10% levy.
He also pointed out that several important product categories remain exempt from the new duties, including generic medicines and certain industrial components used by US manufacturers.
At the same time, India’s imports of US liquefied petroleum gas (LPG) continue to increase, helping narrow the bilateral trade imbalance.
According to Dua, stronger energy imports from the US could also help reduce the likelihood of additional trade measures against India.
What happens next?
The lawsuit is unlikely to alter India’s trade negotiations immediately. However, its eventual outcome could reshape the tariff framework underpinning any future US-India trade agreement.
If the courts uphold the administration’s use of Section 301, the tariffs could remain in place while trade negotiations continue. If they strike them down, Washington may have to rethink its tariff strategy or explore other legal avenues.
For India, the case adds another layer of uncertainty to an already complex set of negotiations. Until there is greater clarity from the US courts, both Dua and Dasgupta believe New Delhi has little to gain from rushing into an interim agreement and more to gain by waiting for the legal process to play out.