India Should Clinch the Interim Trade Agreement with US at the Earliest
President Donald Trump is doubling down on his disruptive tariff agenda despite facing a major setback with the US Supreme Court ruling in a 6-3 vote that he exceeded his authority in using the International Emergency Economic Powers Act to impose sweeping duties on many countries in the world, including India. Before Trump 2.0, no US president had invoked provisions of the IEEPA—intended to address “unusual and extraordinary” threats during a national emergency—to levy such duties. Tariffs are not part of this 1977 law.
This ruling is a significant check on presidential power, but it does not mark the end of trade uncertainty. Trade policy uncertainty will nevertheless continue as the US president has imposed a 150-day 15% global tariff under Section 122 of the Trade Act of 1974 and will launch investigations under Section 301 that could result in higher levies than those that prevailed under the IEEPA regime. Trump’s tariff tyranny thus remains unchecked as the apex court ruling does not impinge on his ability to impose punitive tariffs under Section 338 of the Tariff Act of 1930 or Section 232 of the US Trade Expansion Act of 1962 on steel, aluminium, or autos on national security grounds.
The Ruling and Its Implications
These are indeed challenging times for India and the global economy as Trump appears unfazed by the historic ruling despite the Supreme Court being packed by his nominees and handing himself a win in the recent past, including on the deportation of migrants. The European Union is set to hold an emergency meeting to reassess its pending trade deal with the US. India, too, is closely studying these developments on US tariffs amidst indications that a visit by a team to Washington to finalise the legal text for the first phase of this agreement will be rescheduled at a mutually convenient date.
No doubt Trump is putting up a brave front, but the landmark US apex court ruling strikes a body blow to an expansive vision of his presidential power. It has checked his unbridled, if not whimsical, exercise of authority to unilaterally impose tariffs without congressional oversight. Unlike the IEEPA regime, the alternative means of raising tariffs are procedurally more time-consuming.
Considerable uncertainty lies ahead as US businesses gear up to demand refunds as tariff revenues on emergency powers amounted to $142 billion in 2025, according to The Budget Lab at Yale University. This matter was brought up by a group of businesses and 12 US states who argued that they have been harmed by tariffs. The governor of Illinois has demanded a refund of $1,700 for every family in that state.
The India-US Deal
India and the US have agreed on a framework for an interim bilateral trade agreement under which tariffs will come down to 18%. With the IEEPA tariffs now invalidated, the new duties on Indian goods will not be any different at 15% plus most-favoured nation duties of 3.3%. India must clinch this deal at the earliest as the interim agreement is best read as a calibrated holding operation that buys time, eases frictions, and keeps the comprehensive strategic partnership with the world’s most powerful economy on track.
The arithmetic is straightforward. Under the invalidated IEEPA regime, Indian goods faced additional duties. Under the proposed interim agreement, tariffs would come down to 18%. But with the IEEPA tariffs gone, Indian goods would face 15% plus MFN duties of 3.3% anyway. The deal locks in a known framework and provides predictability.
The Strategic Imperative
Beyond the numbers lies a strategic imperative. The India-US relationship is not just about trade; it is a comprehensive strategic partnership encompassing defence, technology, and geopolitics. An interim trade agreement, even if modest in scope, signals that both sides can work together despite differences. It buys time for more comprehensive negotiations while keeping the broader relationship on track.
Trump’s tariff agenda has disrupted global trade and created uncertainty for businesses worldwide. But uncertainty is the enemy of investment and growth. A deal with the US, even an interim one, provides a measure of certainty for Indian exporters. It tells them what the rules are, at least for now.
The Domestic Political Context
Besides the legal check on his powers, there are also signs of legislative pushback as the US House of Representatives recently voted to rescind tariffs that Trump imposed on Canada—a rare bipartisan rebuke of his trade policy. These are interesting times indeed as countries around the world reassess their trading agreements with the US.
The domestic political pressure on Trump is building. States and businesses that have been harmed by tariffs are demanding relief. The Illinois governor’s demand for a $1,700 refund per family is not just a fiscal argument; it is a political one. When voters feel the pinch of higher prices, they let their representatives know.
The Path Forward
For India, the path forward is clear. The interim agreement should be finalized as soon as possible. The legal text needs to be settled, and the deal needs to be signed. Waiting for a better deal, or hoping that the US trade policy environment will become more predictable, is a gamble.
The Supreme Court ruling has clipped Trump’s wings, but it has not grounded him. He retains other authorities to impose tariffs, and he has shown no reluctance to use them. An interim agreement provides a shield against future actions, at least for the duration of the deal.
Conclusion: Seize the Moment
India should clinch the interim trade agreement with the US at the earliest. The window of opportunity may not remain open indefinitely. The deal provides certainty, eases friction, and keeps the strategic partnership on track. In an uncertain world, certainty is valuable. India should seize it.
Q&A: Unpacking the India-US Trade Deal Context
Q1: What did the US Supreme Court rule regarding Trump’s tariffs?
The Supreme Court ruled 6-3 that President Trump exceeded his authority in using the International Emergency Economic Powers Act (IEEPA) to impose sweeping duties on many countries. IEEPA was intended to address “unusual and extraordinary” threats during national emergencies, and tariffs are not part of this 1977 law. This was a significant check on presidential power.
Q2: Does the ruling mean Trump cannot impose tariffs anymore?
No. Trump retains authority under other statutes, including Section 122 of the Trade Act of 1974 (imposing a 150-day 15% global tariff), Section 301 (investigations that could result in higher levies), Section 338 of the Tariff Act of 1930, and Section 232 (national security tariffs on steel, aluminium, autos). His tariff powers are limited but not eliminated.
Q3: What is the status of the India-US interim trade agreement?
India and the US have agreed on a framework for an interim bilateral trade agreement under which tariffs will come down to 18%. With IEEPA tariffs invalidated, Indian goods would face 15% plus MFN duties of 3.3% anyway. The deal provides a known framework and predictability amid uncertainty.
Q4: Why should India finalize this deal quickly?
The interim agreement is best read as a calibrated holding operation that buys time, eases frictions, and keeps the comprehensive strategic partnership with the US on track. It provides certainty for Indian exporters and signals that both sides can work together despite differences. Delaying risks missing the window of opportunity.
Q5: What is the broader political context in the US regarding tariffs?
There are signs of legislative pushback, with the US House recently voting to rescind tariffs on Canada in a rare bipartisan rebuke. States and businesses harmed by tariffs are demanding refunds—the Illinois governor has demanded $1,700 per family. Domestic political pressure on Trump’s trade policy is building.
