With the US Supreme Court striking down the tariffs imposed by the Trump administration, more than half of India's exports will not have to pay even the 18% tariff and thus the Centre may choose not to rush to sign the bilateral trade agreement, said several trade experts.
The US Supreme Court on Friday, in a six-three ruling authored by conservative Chief Justice John Roberts, upheld a lower court's decision that Trump's use of a 1977 law to impose tariffs exceeded his authority. The justices ruled that the law at issue -- the International Emergency Economic Powers Act, or IEEPA -- did not grant the power to the US President to impose tariffs on trading partners. The court emphasized that the law on imposing tariffs is only meant for use in national emergencies.
"Removal of reciprocal tariffs will free about 55% of India’s exports to the U.S. from the 18% duty, leaving them subject only to standard MFN tariffs. On the remaining exports, Section 232 tariffs will continue — 50% on steel and aluminium and 25% on certain auto components — while products accounting for roughly 40% of export value, including smartphones, petroleum products and medicines, will remain exempt from U.S. tariffs," said Ajay Srivastava, founder of Global Trade Research Initiative and former Indian Trade Service officer.
According to trade experts, the US Supreme Court’s ruling against reciprocal tariffs brings significant legal clarity and reduces tariff uncertainty for India, reinforcing limits on unilateral tariff actions.
"Under the interim trade arrangement the US had agreed to reduce reciprocal tariffs on India to 18% which shall no longer remain relevant following the court’s decision. Any attempt to levy such tariffs would require Congressional approval. This is likely to give much-needed relief and a competitive boost to Indian exporters, while also paving the way for potential refunds of tariffs collected without adequate legal basis," said Manoj Mishra, Partner and Tax Controversy Management Leader, Grant Thornton Bharat.
Both Srivastava and Abhijit Das, expert on international trade and former head, Centre for WTO Studies, Indian Institute of Foreign Trade (IIFT), are of the opinion that there is a need for India re-examine its trade deal with the United States. According to Das, there is no need to rush to sign the agreement and India "should now suspend the negotiations".
As the US is expected to continue relying on sector-specific tariffs under Section 232, experts say the focus of India's negotiations should shift more towards securing durable tariff certainty and stable market access for Indian exporters.
Whether the ruling would bring respite to global trade is yet to be seen as Trump has called the court's decision 'disgraceful' and even said that there are backup plans to reinstate the measures.
