Trump's Tariff, the US Supreme Court and Its Impact on India

The US Supreme Court held that Trump could not impose general tariffs during peacetime under the International Emergency Economic Powers Act (IEEPA). IEEPA was the legal basis for the 18% reciprocal tariff on India and tariffs on other countries. This ruling by the US Supreme Court has effectively struck down the legal basis for the higher rate. India was paying only the standard MFN-style tariffs of 3.5% before Trump’s tariffs. This was a setback for President Trump, but the Trump Administration acted quickly to invoke Section 122 of the US trade law. This little-used provision allows the president to impose tariffs of up to 15% for 150 days, after which Congress must authorise an extension. Under the new rules, a flat 15% tariff is now applied to imports from all countries, including India, from February 24, 2026.

What has Changed Post the Court’s Ruling

The recent announcement by Donald Trump of a 15% “global” tariff on all countries, which came immediately after the US Supreme Court invalidated his previous tariffs imposed on an emergency basis, has upset the trade math calculations for India. What this means for India is that the earlier agreed-upon 18% reciprocal tariff, which was part of the Trump-Modi trade agreement, is now legally dubious, and in its place, a temporary 15% tariff will be imposed on Indian exports to the United States. The impact of this new development is that India will now be faced with a tariff rate that is lower than the 18% rate that was originally agreed to, but higher than the pre-Trump MFN rate of 3.5%.

What Does It Mean for India

For Indian exporters, the changeover from 18% to 15% tariffs is obviously a short-term relief, particularly for industries such as textiles, engineering goods, pharma, and IT-enabled services that have already been impacted by the earlier Trump tariffs. The White House has formally stated that India will now pay 15% “until another authority is invoked,” which means that the 15% tariff is a stopgap arrangement. On the other hand, the administration also seeks a new legal basis to reinstate the higher tariffs. There is, however, some uncertainty regarding whether the 3.5% MFN tariff will be cumulative with the 15%, which may raise the effective tariff rate to around 18.5%; this has not been clarified by the Trump administration yet.

Strategic implications for India

The warning from the court gives New Delhi more leverage in any renegotiation of the India-US trade agreement. India has to carefully review the decision and seek to take advantage of it in order to secure lower tariffs, better market access, or concessions on sensitive products such as agricultural goods and data-related services. However, the 10% global tariff also highlights the unpredictability of US trade policy under Trump and the possibility that India could once again be hit with higher tariffs if Congress passes a 15% type of framework or if Trump finds another way to get the 18% rate reinstated.

Way Forward

India needs to be cautious with eagle eyes on the developments that take place in the US. The Trump Administration will surely try to reimpose 18% tariff on India using some statutes or a trade deal. So, it is very important to watch how the US Congress responds to Section 122. Apart from this, India must realise that President Trump wants to change the direction of history the way President Nixon did with his 1971 decision on the dollar-gold relationship through ‘Nixon Shock’. At this point, when the possibility of any final trade deal with the US is in doldrums, India must use the temporary relief provided by the US Supreme Court to reposition and diversify its export basket to face a higher tariff in the range of 18% without much negatively impacting India’s export. The space, which is now available, must be used to navigate the water more cautiously than earlier, as there is huge uncertainty about the trade deal. In such turbulent times, lobbying works better than any rational tactics.

Dr Rajeev K Upadhyay