India-US Trade Scrutiny Intensifies as Section 301 Probe Weighs on Market Sentiment
- 13th March 2026
- 01:00 PM
- 2 min read
Summary
The US Trade Representative has launched a Section 301 investigation into manufacturing overcapacity across 16 economies, including India. The probe, targeting sectors like steel, solar, and textiles, coincides with rising geopolitical tensions in West Asia and persistent foreign fund outflows.Mumbai | March 13, 2026
Indian equity markets came under pressure on Friday as two converging forces, a new US trade probe and surging crude oil prices rattled investor confidence. Brent crude breached the $100 per barrel mark amid escalating conflict in West Asia, while the United States Trade Representative’s (USTR) initiation of a Section 301 investigation added a fresh layer of trade uncertainty, particularly for export-heavy sectors.
The USTR launched the investigation on March 11, 2026, targeting structural excess capacity in manufacturing sectors across India and 15 other economies – China, the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, Korea, Vietnam, Taiwan, Bangladesh, Mexico, and Japan. USTR Jamieson Greer stated the probe will examine alleged excess capacity in sectors including solar modules, petrochemicals, steel, textiles, health-related goods, construction materials, and automotive products, determining whether such practices are unreasonable or discriminatory and burden US commerce.
The move follows the US Supreme Court’s February 20, 2026 ruling that invalidated the Trump administration’s reciprocal tariff regime under the International Emergency Economic Powers Act (IEEPA), prompting Washington to seek more legally durable trade enforcement tools. A separate Section 301 probe into goods produced with forced labour was also announced around the same time, further complicating the bilateral trade outlook. After public hearings and consultations with the concerned economies, the USTR will determine whether to recommend tariff or non-tariff actions to the President.
On the institutional flows front, Foreign Institutional Investors (FIIs) have been net sellers of ₹46,166.58 crore month-to-date, offloading ₹7,049.87 crore in the previous session alone. Domestic Institutional Investors (DIIs) have provided a meaningful counterbalance, remaining net buyers of ₹60,549.28 crore month-to-date, including ₹7,449.77 crore in the previous session.
The immediate outlook for Indian markets remains tethered to geopolitical developments in West Asia and the progression of the US trade inquiry. The USTR has scheduled public hearings from May 5, with a goal to conclude the investigation before temporary Section 122 tariffs expire on July 24, 2026. Analysts expect markets to remain volatile as the Ministry of Commerce evaluates its response to the USTR’s findings and the impact on India’s $58.2 billion goods trade surplus with the US.
More updates on India’s economy and markets will follow on PL Capital.
