The Hindu:- Published on 21 FEB 2026
Why Is This Issue in the News?
India–US trade relations have come under fresh spotlight after the Supreme Court of the United States struck down the legal basis of several previously imposed “reciprocal tariffs” by Donald Trump. The Court ruled that the President could not use the International Emergency Economic Powers Act (IEEPA) to impose sweeping tariffs during peacetime.
In response, President Trump issued a new executive order invoking Section 122 of the Trade Act, introducing a temporary 10% tariff on imports from all countries, including India. However, he simultaneously stated that India would still face an 18% tariff as per a previously negotiated trade understanding with Narendra Modi.
This apparent contradiction—10% under a new order versus 18% under a trade deal—has generated uncertainty for Indian exporters and global markets. The issue is in the news because it combines judicial intervention, executive authority, trade diplomacy, and economic consequences for key sectors.
Background: The Legal and Policy Context
1. Use of IEEPA for Tariffs
The International Emergency Economic Powers Act (IEEPA) allows the US President to regulate commerce after declaring a national emergency in response to an unusual or extraordinary foreign threat. President Trump had earlier used this provision to justify imposing “reciprocal tariffs” on multiple countries, arguing trade imbalances constituted economic threats.
However, critics argued that trade deficits do not qualify as national emergencies under IEEPA. The Supreme Court agreed, ruling that the Act cannot be used to impose broad tariffs in peacetime without clear congressional backing. This judgment effectively invalidated the earlier tariff framework affecting several countries, including India.
2. Invocation of Section 122
After the ruling, President Trump quickly invoked Section 122 of the Trade Act of 1974. This rarely used provision allows the President to impose temporary tariffs of up to 15% for 150 days to address balance-of-payments issues, without immediate Congressional approval.
Under this authority, a uniform 10% tariff on imports from all countries was announced, effective February 24. The move was seen as an attempt to restore tariff leverage after the judicial setback.
The Core Confusion: 10%, 13.5%, or 18%?
The central issue revolves around the actual tariff rate applicable to Indian goods:
- 10% Tariff: Legally, under Section 122, all countries—including India—would face a temporary 10% tariff.
- 18% Tariff: President Trump has publicly stated that India would continue to pay 18% as agreed in a prior trade negotiation.
- 5% Estimate: Some trade experts suggest that if the 10% new levy is added to an existing 3.5% standard rate, the effective tariff could be around 13.5%. However, there is no official confirmation of this interpretation.
The White House later clarified that, technically, all countries with trade deals would temporarily drop to the 10% rate. This contradiction between political statements and legal interpretation has created confusion for exporters.
Sectoral Impact on India
- Steel and Aluminium: Certain tariffs imposed under Section 232 (national security grounds) remain unaffected:
- Steel: 50%
- Aluminium: 50%
These high tariffs significantly affect Indian metal exporters. Section 232 tariffs are legally distinct from the IEEPA-based tariffs and remain valid.
- Auto Components: Specific auto parts continue to face 25% tariffs. This affects India’s growing auto-component industry, which has increasingly integrated into global supply chains.
- Textiles and Apparel: The United States is one of the largest markets for Indian textiles and garments. If tariffs remain at 18%, Indian exporters could lose price competitiveness compared to countries like Vietnam or Bangladesh. A 10% rate would provide relief and boost exports.
- Gems and Jewellery: India’s gems and jewellery sector depends heavily on US demand. Lower tariffs could strengthen the sector, which is labour-intensive and supports millions of jobs.
- MSMEs and Manufacturing: Micro, Small, and Medium Enterprises (MSMEs), particularly in labour-intensive sectors, would benefit from lower tariff barriers. An 18% rate could squeeze profit margins and reduce export orders.
Economic Implications for India
- Export Competitiveness: Tariffs directly influence the final price of goods in the importing country. A higher tariff increases the cost for American consumers, reducing demand for Indian products. If the tariff settles at:
- 10% → Indian goods remain relatively competitive.
- 18% → Export volumes could decline significantly.
- Trade Balance: The US is one of India’s largest trading partners. A tariff hike may widen India’s trade deficit if exports fall while imports from the US continue.
- Investment Climate: Uncertainty in tariff rates affects investor confidence. Export-oriented industries may delay expansion plans until clarity emerges.
Strategic and Diplomatic Dimensions
India–US trade ties are part of a broader strategic partnership covering defense cooperation, Indo-Pacific security, semiconductor supply chains, and technology transfers. The tariff dispute, though economic in nature, intersects with geopolitical considerations.
The Supreme Court ruling gives India a stronger legal and negotiating position. Since the earlier higher tariffs were invalidated, India can argue for equal treatment under the new 10% framework. An Indian delegation’s planned visit to Washington DC suggests active diplomatic engagement to resolve the confusion.
Legal Significance of the Supreme Court Ruling
The ruling by the Supreme Court of the United States is significant for several reasons:
- Limits Executive Authority: It reinforces Congressional primacy in trade policy.
- Precedent for Future Cases: Future presidents may face judicial scrutiny if they attempt to use emergency laws for economic measures.
- Separation of Powers: The case strengthens constitutional checks and balances in US governance.
For India, this ruling indirectly benefits its negotiating leverage, as the legal basis of earlier tariffs has been weakened.
Political Context in the United States
President Trump’s renewed tariff strategy aligns with his protectionist economic stance. By imposing a universal 10% tariff, he signals continued commitment to protecting domestic industries.
However, the contradiction between political statements (18%) and administrative clarification (10%) may reflect internal policy debates or negotiation tactics. Tariffs are often used as bargaining tools in trade negotiations. The higher 18% figure may serve as leverage during discussions with India.
Possible Scenarios Ahead
- Scenario 1: Uniform 10% Rate: If the White House clarification prevails, Indian goods would face a temporary 10% tariff. This would stabilize trade relations and offer relief to exporters.
- Scenario 2: 18% Rate Under Bilateral Deal: If the prior trade understanding is enforced, Indian exports may face higher costs. This could strain relations and trigger renegotiation demands.
- Scenario 3: Negotiated Compromise: India and the US may negotiate a middle-ground solution, possibly sector-specific concessions or phased tariff adjustments.
Implications for Global Trade
This development has global significance beyond India:
- It highlights judicial oversight over executive trade actions.
- It signals potential volatility in US trade policy.
- Other countries affected by earlier reciprocal tariffs may also seek renegotiations.
India’s Strategic Options
- Diplomatic Engagement: High-level talks to clarify tariff structures.
- WTO Mechanisms: If discriminatory tariffs persist, India could explore multilateral remedies.
- Export Diversification: Reducing dependence on a single market by expanding into Europe, Africa, and Southeast Asia.
- Domestic Reforms: Enhancing competitiveness through production-linked incentives (PLI), logistics improvements, and quality upgrades.
Broader Economic Context
The US remains one of India’s largest export destinations. Key export categories include pharmaceuticals, IT services, textiles, engineering goods, and jewellery.
Tariff uncertainty comes at a time when global trade is already facing disruptions due to geopolitical tensions, supply chain shifts, and protectionist trends. Stable tariff arrangements are crucial for sustaining India’s export-driven growth strategy.
Conclusion
The India–US tariff issue is in the news because it represents the intersection of judicial intervention, executive authority, and international trade diplomacy. The Supreme Court’s ruling has disrupted the earlier tariff framework and triggered a fresh executive response.
At the heart of the matter lies a simple but economically crucial question: Will Indian goods face a 10% tariff, an 18% tariff, or some intermediate rate? The answer will significantly affect Indian exporters, especially in sectors like textiles, gems, steel, and auto components. It will also shape the broader trajectory of India–US trade relations.
While the legal position currently suggests a uniform 10% temporary tariff, political statements indicate that negotiations remain ongoing. The coming weeks, particularly diplomatic engagements in Washington, will determine the final outcome.
Ultimately, this episode demonstrates how domestic court rulings can reshape global trade dynamics and how economic diplomacy plays a crucial role in protecting national interests in an interconnected world.
