India Should Keep at It with the US Trade Deal, Navigating the Post-Supreme Court Landscape
If for nothing else, you gotta hand it to Donald Trump for being besotted by his own unique brand of trade economics that goes against much of US business. After the Supreme Court told the president that he chose the wrong tool for his trade policy, the self-styled Trade King has already taken the hint to impose 15% globalised tariffs. His regime now seeks other means to bend trading partners to its will.
The law allows Trump to impose tariffs to uphold ‘national security’ and counteract ‘unfair trade practices,’ but as time-bound measures and subject to congressional oversight. The emergency powers struck down have yielded a rich haul of trade deals that countries are unlikely to back out of, given Trump’s access to other tariff measures.
The Limits of Unpredictability
If the verdict has accomplished anything, it’s to limit Trump’s use of unpredictability as leverage. US tariffs can’t be used anywhere, anytime, for any reason. This is a significant, if subtle, shift. The Trump administration’s trade policy has relied heavily on the element of surprise—on keeping trading partners off-balance, unsure of what might come next. That uncertainty has been a powerful negotiating tool.
The Supreme Court ruling changes that calculus. While Trump retains authority to impose tariffs under other statutes, those authorities come with constraints: they are time-bound, they require investigations, they are subject to congressional oversight. The wild card element is diminished.
Negotiations with the US will continue, with slightly more wiggle room on the other side of the table. India should be able to set its market access boundaries more forcefully. Commitments made in concluded negotiations are likely to be maintained, assuming the India-US trade deal dealt with low-hanging fruit before moving on to knottier issues.
The Vodafone Precedent
Indian negotiators will be informed of the Trump regime’s options over tariffs through its own experience with taxing transfers of Indian assets between overseas entities. The Government of India amended the law to introduce retrospective tax after the Supreme Court ruled in favour of Vodafone. The law was revoked a decade later after international arbitration losses.
This is a useful parallel. The retrospective tax was an attempt to rewrite the rules after the fact, to claim revenue that the government believed it was owed. It was challenged, litigated, and eventually abandoned after India lost in international arbitration. The episode cost India in terms of investor confidence and legal fees.
Trump’s tariff actions are similarly aggressive, similarly controversial. They may also be challenged, litigated, and eventually constrained. But that process takes time, and in the meantime, the tariffs remain in effect.
Trump’s Statutory Authority
So, Trump’s is hardly the ‘original sin’. He has statutory authority to pursue foreign affairs through tariffs. The Supreme Court ruling did not strip him of all tariff powers; it merely said he used the wrong statute for the reciprocal tariffs. Other statutes remain available.
Section 122 of the Trade Act of 1974 allows tariffs for up to 150 days to address balance-of-payments issues. Section 232 allows tariffs on national security grounds. Section 301 allows tariffs in response to unfair trade practices. Each has its own procedures and constraints, but each remains a tool the administration can use.
Why India Should Stay Engaged
Given this landscape, it still makes sense for India to seek out a negotiated settlement through trade. There are several reasons for this.
First, a negotiated deal provides certainty. Even if the deal is imperfect, it establishes rules of the road that both sides can rely on. In a world of uncertainty, certainty has value.
Second, walking away from talks could provoke a hostile response. The Trump administration has shown itself willing to retaliate against countries it perceives as阻碍 its agenda. India does not need that kind of attention.
Third, the deal can be renegotiated. The February 6 joint statement includes a clause allowing either side to modify commitments if the other side’s tariffs change. The Supreme Court ruling has changed the tariff landscape; India can use this to seek better terms.
Fourth, India has leverage of its own. The US wants access to Indian markets. It wants Indian cooperation on strategic issues. It wants to sell more to India. These are bargaining chips.
The Midterm Election Factor
Continuation of protectionist trade will depend on Republican control of Congress in a midterm election year. If Democrats take control of one or both chambers, Trump’s trade agenda will face significant congressional oversight. Investigations could be launched. Legislation could be introduced. The administration’s freedom of action would be constrained.
But US consumers, who ultimately pick up the tab, are not revolting on a scale to bring this tariff edifice down yet. The pain is real—tariffs raise prices on everything from washing machines to automobiles—but it is diffuse. No single consumer feels the impact enough to take to the streets. The political cost is manageable for now.
Conclusion: Keep at It
India should keep at it with the US trade deal. The Supreme Court ruling has changed the landscape, but it has not eliminated the need for negotiation. If anything, it has created new opportunities to seek better terms.
Indian negotiators should be clear-eyed about the constraints Trump faces. They should use the reopening clause in the joint statement to press for modifications. They should set market access boundaries more forcefully. They should recognize that Trump retains statutory authority to impose tariffs under other provisions, so a negotiated settlement remains preferable to confrontation.
The path forward is not easy, but it is navigable. India has dealt with difficult trade partners before. It has survived retrospective taxation battles and come out stronger. It can navigate this as well.
Q&A: Unpacking the US Trade Deal After the Supreme Court Ruling
Q1: What did the Supreme Court ruling change about Trump’s tariff powers?
The ruling struck down Trump’s use of emergency powers (IEEPA) to impose reciprocal tariffs. However, Trump retains authority under other statutes: Section 122 (150-day global tariffs for balance-of-payments issues), Section 232 (national security tariffs), and Section 301 (unfair trade practices tariffs). These are time-bound and subject to congressional oversight, limiting Trump’s ability to use unpredictability as leverage.
Q2: What is the Vodafone parallel mentioned in the article?
India’s retrospective tax battle with Vodafone serves as a parallel. After the Supreme Court ruled in Vodafone’s favour, India amended the law to tax overseas transfers of Indian assets retroactively. The law was revoked a decade later after international arbitration losses. This illustrates how aggressive tax/tariff actions can be challenged, litigated, and eventually constrained—but the process takes time.
Q3: Why should India continue negotiating the trade deal despite the ruling?
Three reasons: First, a negotiated deal provides certainty in an uncertain world. Second, walking away could provoke hostile retaliation. Third, the February 6 joint statement includes a clause allowing either side to modify commitments if the other’s tariffs change—the ruling gives India grounds to seek better terms. Fourth, India has its own leverage (market access, strategic cooperation).
Q4: How might the US midterm elections affect trade policy?
If Democrats gain control of Congress, Trump’s trade agenda will face significant oversight. Investigations could be launched, legislation introduced, and the administration’s freedom of action constrained. However, US consumers haven’t revolted against tariffs at sufficient scale yet, so the political cost remains manageable for now.
Q5: What should Indian negotiators focus on now?
Indian negotiators should use the reopening clause to press for modifications, set market access boundaries more forcefully, and recognize that a negotiated settlement remains preferable to confrontation since Trump retains statutory authority under other provisions. The landscape has shifted, creating new opportunities to seek better terms while avoiding hostile responses.
