The US Supreme Court has dismantled President Donald Trump’s protectionist agenda, striking down his sweeping global tariffs. This potentially signals a reset of India’s exports to the US and complicates the India-US trade deal.
In a 6-3 decision, the U.S. Supreme Court found that the Trump administration exceeded its constitutional authority by using a 1977 emergency-powers law to unilaterally change the country’s trade policy. Chief Justice John Roberts said that while the International Emergency Economic Powers Act allows the U.S. President to respond to foreign threats, it does not allow a “blank check” to impose taxes across the board, indefinitely.
Roberts wrote, “The power of imposing duties on commerce rests in the hands of Congress.” “The President cannot simply declare the trade deficit an ‘emergency’ to exercise that authority.”
india reset
While an interim India-US trade agreement reduced US tariffs on India from 50% to 18% for most of last year, the SCOTUS decision effectively dismantles the legal basis for the original emergency tariffs.
Economists from the Penn-Wharton Budget Model estimate that the US could be forced to return more than $175 billion collected in tariffs under the now invalid IEEPA authority – a significant portion of which would be returned to Indian exporters in the textile, chemical and engineering sectors.
“For Indian industry, this decision provides immediate relief from the burden of high reciprocal duties, especially in our labour-intensive sectors like textiles, engineering and chemicals,” Saurabh Aggarwal, tax partner at EY India, told Hindustan Times over WhatsApp.
As said, US import duties under Section 232 are still affecting sectors like steel, aluminium, automobiles etc.
India-US trade agreement
The decision complicates the finalization of a comprehensive India-US trade agreement, which was scheduled to take effect in April. Under the framework agreed earlier this month, India had committed to a $500 billion “Buy American” program for energy and technology in exchange for tariff relief.
Now, after the SCOTUS decision on Trump tariffs, New Delhi has the possibility of bargaining. It could seek some concessions on Russian oil imports, as well as negotiate a broader framework of deals involving textiles and agricultural products.
“While we have already actively secured our interests through interim bilateral agreements, this judicial reform in the US further strengthens our negotiating hand,” Aggarwal said. “The interim agreement serves as an important ‘stability bridge’, protecting Indian exporters from sudden instability while tariff-level negotiations continue.”
“We see this as a net positive; it allows India to double its manufacturing pace without the immediate threat of arbitrary trade barriers.”
Of course, the Trump White House still has legal recourse to maintain its “America First” reciprocity agenda, including Section 122 of the 1974 Trade Act.
market reaction
US stocks rose after the SCOTUS ruling while bonds fell against the dollar, as investors try to gauge how much the decision changes US trade policy.
MSCI Inc.’s index of developing country currencies as of 10:20 a.m. Friday in New York. The gauge rose 0.1%. Latin American currencies and the South African rand immediately rose to session highs following the court’s 6-3 decision.
“This should be a bit positive for EMFX, as it highlights the policy uncertainty out of the US,” said Alvaro Vivanco, emerging markets macro strategist at Wells Fargo. This “promotes the diversification theme.”
“It appears the administration was just hoping the IEEPA tariffs would be kept in place,” said Brian Jacobsen at Annex Wealth Management. “This means the Trump administration will insist on country-specific and sector-specific tariffs. These take longer to implement.”
