NEW DELHI: The US Court’s decision to declare President Donald Trump’s retaliatory tariff as illegal has given India time to rethink its trade negotiation strategies with the US. In order to escape the retaliatory tariff of 26% on Indian goods exported to the US, India was planning to end the first phase of trade negotiations by June – ahead of the 9 July deadline, when the 90-day relief period ends.
But with the US court questioning the legal validity of the tariff, India may want to go slow on ceding grounds to the US by agreeing to lower tariff on imports from the US, according to government sources.
Queries regarding this sent to the Ministry of Commerce did not elicit any response till the time of writing of this report.
The US Court of International Trade has ruled that the International Emergency Economic Powers Act (IEEPA) does not authorise any of the 'Worldwide, Retaliatory, or Trafficking Tariff Orders'.
“The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by the International Emergency Economic Powers Act (IEEPA) to regulate importation by means of tariffs. The Trafficking Tariffs fail because they do not deal with the threats set forth in those orders,” said the court in its order.
IEEPA allows the US president to regulate international trade by declaring national emergency due to extra-ordinary threat to the US national security.
Under pressure from the US government, India is reportedly preparing to eliminate tariffs on thousands of products including automobiles, and agriculture, open its government procurement market, weaken intellectual property and data laws to benefit US tech and pharma companies, and allow more foreign market access, including approving Starlink’s satellite internet — mostly as one-sided concessions.
But experts say such a deal lacks balance and fairness. The US Court’s decision may give India a breather and time to rethink the terms of negotiations.
“India should resist any agreement shaped by threats or based on unlawful measures. Not only do these Trump-era tariffs violate World Trade Organisation (WTO) rules, but the US court has now confirmed they also breach US domestic law,” says Ajay Srivastava, founder of Global Trade Research Initiative (GTRI). He says with the Trump tariffs standing on shaky legal ground, India must pause and reassess its negotiation strategy before committing to an FTA that could disproportionately favor US interests.
According to Sangeeta Godbole, former director general, Services Export Promotion Council, and former trade negotiator for India, the US state will get into a long line of litigation to defend the reciprocal tariffs.
“So right now, it will be wait and watch with fingers crossed for other governments. If tariffs are thrown out, the entire rationale of the BTA is gone. India has never been keen on an FTA with US. We are negotiating with literally everyone except US and China. Additionally, with such a transactional and unreliable government, the BTA becomes even more undesirable,” she says.