The US Supreme Court Ruling on Trump Tariffs: Implications for US-India Trade Relations 

SEO: US Supreme Court Ruling on Trump Tariffs: Impact on India-US Trade Deal 2026 

On February 20, 2026, the US Supreme Court (SCOTUS) delivered a landmark unfavourable judgement on Trump tariffs. The SCOTUS delivered a 6-3 judgment in Trump's (POTUS) tariff cases, including the SCOTUS ruling that the International Emergency Economic Powers Act (IEEPA) of 1977 does not authorise the President (POTUS) to impose tariffs. The US Chief Justice, writing for the majority, held that IEEPA's grant of authority is to control imports, not to impose tariffs by the President. As tariffs are purely import duties or a form of indirect tax, only the US Congress has the power to impose them under the Constitution (Article I). The SCOTUS emphasised that prior to Trump, no President had ever used IEEPA in this manner, despite the Act having no provision to impose tariffs under any form.

This landmark SCOTUS ruling invalidated Trump’s broad “reciprocal” tariffs and targeted duties (such as those related to drug trafficking ─ the Fentanyl Levy and trade deficits) imposed by President Trump since mid-2025, affecting billions in collected revenue. However, the decision was silent on refunds for the estimated $175 billion in tariffs (import duties) already collected by the concerned US customs authority, leaving that issue to lower courts, primarily the US Court of International Trade.

US President Trump’s New 10% Global Tariff After Supreme Court Ruling

On Friday, February 20, President Trump's immediate response was defiant. In a White House presser, he denounced the SCOTUS ruling as a “terrible, defective, and unpatriotic decision" swayed by “foreign interests” and expressed shame towards certain justices (who ruled against tariffs) for lacking courage. Trump promptly signed a proclamation imposing a temporary 10% ad valorem global import surcharge under Section 122 of the Trade Act of 1974, effective 24 February 2026, for 150 days. This move, coupled with the continuation of existing Section 232 (national security) and Section 301 (unfair practices) tariffs, ensured continuity with his typical MAGA (Make America Great Again) rhetoric.

The ruling and subsequent actions have significant ramifications & uncertainties for global trade and also for bilateral trade relations between the US and India. In early February 2026, both had announced an interim trade framework following discussions between President Trump and the Indian PM Modi. The agreement reduced US reciprocal tariffs on many Indian goods to 18% from the actual reciprocal tariffs of 25% + the Russian oil penalty of 25% (weighted average effective tariffs of ~35% after accounting for various exemptions). while India is committed to eliminating or reducing barriers to US industrial and agricultural products, scaling back Russian oil imports, and increasing purchases of US/VZ energy products and other goods worth $500 billion by 2030.

Overview of the Supreme Court Ruling and the US Response to Trump Tariffs

The US Supreme Court's decision stemmed from challenges by importers and businesses arguing that IEEPA, enacted to address foreign threats without congressional approval for routine economic measures, was misused for broad tariffs. The majority opinion clarified that “regulate importation” does not encompass levying duties, as tariffs are a congressional power. Dissenters argued for broader executive flexibility in emergencies.

The ruling vacated IEEPA-based tariffs but left intact other statutory tools Congress has provided over decades. President Trump, framing the outcome as a technical setback rather than a defeat, announced alternatives immediately. He signed an executive order terminating the invalidated IEEPA duties “as soon as practicable” and a proclamation for the 10% surcharge under Section 122, which permits temporary import restrictions (up to 15%) for 150 days to remedy balance-of-payments deficits or currency risks. The 10% import surcharge applies globally to most imports, in addition to existing duties, with exemptions for critical minerals, energy products, select agricultural items (e.g., beef, tomatoes, and oranges), pharmaceuticals, certain electronics, vehicles/aerospace, informational materials, donations, and goods under Section 232 or preferential trade agreements like USMCA and CAFTA-DR. Annexes to the proclamation detail HTSUS modifications, ensuring precise implementation.

The USTR Ambassador Greer issued a statement confirming the ruling affects only IEEPA tariffs, while Section 232 and 301 measures remain in force. The administration is initiating new Section 301 investigations into unfair practices by major partners, conducted on an accelerated basis. The US Treasury Secretary Bessent projected that 2026 tariff revenue would remain “virtually unchanged” through these alternatives. The de minimis exemption for low-value shipments (<$800) was also continued, with postal items subject to the 10% rate. This pivot buys time for longer-term actions while preserving leverage, though it introduces temporary uncertainty for importers and trading partners.

Potential Impact on US-India Trade Relations

The US-India interim BTA framework, announced on February 6, 2026, via a joint statement, represented a significant de-escalation in tensions. The US agreed to lower reciprocal tariffs to 18% on most of the goods, including textiles, apparel, leather, footwear, plastics, chemicals, machinery, home décor, and artisanal products, with potential further reductions to even 0% for generics, gems/diamonds, and aircraft parts. India is committed to tariff cuts on US industrial and agricultural goods (e.g., dried distillers’ grains, sorghum, nuts, fruits, soybean oil, and wine/spirits), addressing non-tariff barriers (NTBs), reducing Russian oil dependence, and boosting US imports.

On February 20, 2026, after the unfavourable SCOTUS ruling, POTUS repeatedly affirmed “nothing changes” post-ruling, describing the deal as “fair” and praising PM Modi as a “great man” for the “flip” (India paying US tariffs while gaining access):

• Nothing changes w.r.t. the trade deal with India; they'll be paying, and we will not be paying tariffs. 
• PM Modi is a great man; he was much smarter than the people that he was against in terms of the US. 
• PM Modi was ripping us off, so we made a deal with India, and it's a fair deal now. 
• We are not paying tariffs to India now & they are paying to us; we did a little flip.

The USTR Greer emphasised that Trump-negotiated agreements remain in effect, with partners expected to honour good-faith commitments.

After Trump’s New 10% Tariff: How Much Tariff Is India Facing—50%, 25%, 18% Or 10%? 

However, the 10% Section 122 surcharge applies to India (no country-specific exemption beyond listed products), in addition to base MFN rates (~3.5% average till Trump’s April’25 reciprocal tariffs take effect). For non-exempt goods, the effective rate is approximately 13.5%, a short-term reduction from the current reciprocal levels of 35% and the proposed ≤18% (to be effective after the BTA). Exemptions benefit India substantially: generic pharmaceuticals (a top export), certain electronics, and select agriculture/spices align with the listed categories, potentially minimising impact.

On February 21, 2025, the Indian government sources welcomed the drop to 10% as relief from the 25% prior rates, noting the 18% was agreed upon but not fully notified/implemented before the ruling. This temporary cut aids exporters in textiles, pharma, and gems—key to India's $200 billion+ bilateral goods trade; India enjoys a trade surplus (goods + services) with the US to the tune of around $56 billion/year, followed by the combined EU at ~$36 billion. The US is India’s biggest client in terms of exports and also in inward remittances (~$37 billion/year).

The risk of Trump’s higher reciprocal tariffs remains with more uncertainties. 

Trump’s new 10% import surcharge expires mid-July 2026, absent congressional extension. New Section 301 probes (targeting subsidies, IP, and digital taxes among “most major partners”) could lead to tailored duties on India. Volatility persists amid refund litigation for prior collections. 

Going by various ongoing comments by Trump and other key US officials/policymakers and various other reports:

• The Trump admin may ensure the present level of reciprocal tariffs exists in any form from June '26 (after 150 days) – like 18% on India, even if there are some temporary reprieves.

• Most of the US trade deals, including those with the EU is not actively implemented to date.
• The US and India have finalised a framework for an interim trade agreement in early February 2026. The agreement is still not formalised as it was expected to be formally signed around mid-March 2026. 
• There may not be any major changes in the US-IN BTA framework, and India may not object to Trump’s tariff stance, irrespective of the SCOTUS ruling.
• Almost every country, including India, may term the SCOTUS ruling as an internal issue of the US and may not fight with the Trump administration over these tariff issues.
• Despite Trump’s tariff tantrum, after considering many concessions and exemptions, the real effective weighted average tariffs are around 8.5%, even below the 10% basic tariff against the earlier (Pre-Trump 2.0) ~3%.
• Even if Trump finally imposes 10% + 3.5% (earlier tariffs) = 13.5% basic tariffs on all countries, including India, in future, it would be equivalent to 20.5% total taxes in the US for imported goods (although the US has no Federal VAT/GST, states have an average sales tax of around 7.5%)
• Trump’s reciprocal tariffs policy means equivalent total taxes on each other (Tariffs +VAT/GST/Sales Tax)
• For India, the US goods now face around 13.5% weighted average IGST (reduced from 15.5% after GST 2.0 recalibrations in September '25).
• Thus, if the US imposes 13.5% average (MFN) tariffs on Indian Goods, it would be equivalent to 20.5% total tax (including US State Sales Taxes), and in that scenario, India has to impose a maximum 7%  MFN or even 0% tariffs on US goods eventually (total tax 20.5% - 13.5%).
• At present, as per the US-IN BTA framework, India may impose 10% MFN tariffs on US goods, which may decrease over time (on a case-by-case basis) to 5-0% (after 10-15 years) to protect the interests of the locals/domestic producers.
• Although lower tariffs on Indian goods will be beneficial for Indian exporters, the reciprocity would be equally harmful for Indian producers if not dealt with prudently and in a pragmatic way.

Conclusions

Strategically, the SCOTUS ruling reinforces checks on Trump’s executive power but does not derail the concept fully. Like every other major country, the US also has the right to impose reasonable tariffs (say 10%) along with standard VAT/GST (say 15%) to ensure higher revenue and a gradual reduction of the fiscal/budget deficit. But Trump is treating the tariff as a weapon to fight geopolitical issues with almost every other country, even with known long-term allies. Looking ahead, Trump may double down on tariffs and also on various other geopolitical issues, including Iran. Thus, although the SCOTUS ruling on POTUS tariffs is in line, looking ahead, Trump’s potentially escalated tariff tantrum may cause more uncertainties and chaotic policies, which may destabilise both Wall Street and Dalai Street in the coming days.