The US is lifting its 10% Section 122 import surcharge on July 24, providing relief to 92% of India's $87.2 billion merchandise exports. While this return to standard WTO-compatible tariffs eases immediate pressure on sectors like textiles and engineering, exporters face ongoing uncertainty from pending Section 301 trade investigations.
Detailed Coverage
Indian exporters will see a reduction in US import duties starting July 24, 2026, as the temporary 10% Section 122 surcharge reaches its expiration. This change affects approximately 92% of India’s $87.2 billion annual merchandise exports to the US, allowing these goods to revert to standard Most Favored Nation (MFN) tariff rates recognized by the World Trade Organization.
This shift follows a period of volatile trade policies. Since February 2026, many Indian exports—including engineering goods, textiles, and chemicals—were subjected to this 10% surcharge after the US Supreme Court invalidated previous reciprocal tariffs. With the surcharge ending, these sectors will no longer face the additional tax, potentially improving price competitiveness in the US market.
Impact on Key Export Sectors
The relief primarily benefits products that were previously caught under the surcharge regime. However, not all goods are included in this rollback. Approximately 8% of India's exports to the US, specifically those falling under Section 232 national security tariffs, remain unchanged. Products such as steel and aluminum continue to attract high duties, with steel facing a total tariff of 52.5% and aluminum at 55%. These sectors remain insulated from the current relief, as their duties are governed by different legislative frameworks.
Future Trade Risks
While the expiration of the surcharge provides short-term respite, the trade environment remains sensitive to new regulatory hurdles. The Global Trade Research Initiative (GTRI) has pointed to two active Section 301 investigations by the US administration. These probes are examining global supply chains regarding allegations of forced labor and excess manufacturing capacity. India is currently a focus in both investigations. The Office of the US Trade Representative has already proposed a 12.5% tariff specifically linked to the forced labor inquiry.
Furthermore, beyond these investigations, the sector faces long-term policy risks. For instance, the Indian pharmaceutical industry, which has largely been exempt from recent surcharges, may encounter new, higher tariffs on generic medicine exports beginning in August 2028.
For investors and companies involved in international trade, the primary focus remains the outcome of the ongoing Section 301 investigations. The potential for new, targeted, or sector-specific tariffs remains a monitorable factor that could offset the benefits gained from the removal of the broader surcharge. Market participants will likely track upcoming official announcements from the US government regarding these investigations, as they will determine whether the current relief marks a permanent return to stable trade terms or a temporary pause before new restrictions are implemented.