The US Supreme Court has dismantled President Donald Trump’s protectionist agenda, striking down his sweeping global tariffs. That potentially signals a reset for India’s exports to the US and complicates the India-US trade deal.
In a 6-3 ruling, the US Supreme Court found that Trump administration exceeded its constitutional authority by using a 1977 emergency-powers law to unilaterally overhaul the nation’s trade policy. Chief Justice John Roberts stated that while the International Emergency Economic Powers Act allows the US President to respond to foreign threats, it does not grant a “blank check” to impose indefinite, across-the-board taxes.
“The power to levy duties on commerce resides with Congress,” Roberts wrote. “The president cannot simply declare a trade deficit an ‘emergency’ to seize that mantle.”
The India Reset
While the interim India-US trade deal reduced US tariffs on India to 18% from 50% through most of last year, the SCOTUS verdict effectively dissolves the legal foundation for the original emergency tariffs.
Economists at the Penn-Wharton Budget Model estimate the US may now be forced to refund upwards of $175 billion collected globally under the invalidated IEEPA authority—a significant portion of which would return to Indian exporters in the textile, chemical, and engineering sectors.
“For Indian industry, this ruling provides immediate relief from the overhang of high reciprocal duties, particularly in our labour-intensive sectors such as textiles, engineering, and chemicals,” Saurabh Agarwal, Tax Partner at EY India, told Hindustan Times over WhatsApp.
That said, US import duty under Section 232 still continue impacting sectors such as steel, aluminium, automobiles, etc.
India-US trade deal
The decision complicates the finalisation of a broader India-US trade deal, which was scheduled to be effective in April. Under the framework agreed upon 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 ruling on Trump tariffs, New Delhi has a bargaining chip. It can seek some concessions on Russian oil imports, as well as negotiate broader contours of the deal involving textiles and agri-products.
“While we have already proactively secured our interests through the interim bilateral agreement, this judicial correction in the US further strengthens our negotiating hand,” Agarwal said. “The interim pact serves as a critical ‘stability bridge,’ protecting Indian exporters from sudden volatility while tariff-level negotiations continue.”
“We see this as a net positive; it allows India to double down on its manufacturing momentum without the immediate threat of arbitrary trade barriers.”
To be sure, the Trump White House still has legal recourse, including Section 122 of the 1974 Trade Act to maintain its “America First” reciprocity agenda.
Market Reaction
US stocks rose while bonds fell alongside the dollar after the SCOTUS order, with investors trying to figure out how much the ruling changes US trade policy.
An MSCI Inc. gauge of developing-nation currencies rose 0.1% as of 10:20 am in New York Friday. Latin American currencies and South African rand immediately climbed to session highs following the 6-3 decision by the court.
“This should be marginally positive for EMFX, mostly because it underscores the policy uncertainty out of the US,” said Alvaro Vivanco, emerging markets macro strategist at Wells Fargo. It “gives a push to the diversification theme.”
“It seemed like only the administration was holding out expectations that IEEPA tariffs would be upheld,” said Brian Jacobsen at Annex Wealth Management. “This just means the Trump Administration will pivot to country-specific and sector-specific tariffs. Those take longer to impose.”