US Tariffs Got Turfed Out But Keep the Deal in Play, Why India Should Stay the Course
Does the US Supreme Court verdict that scotched President Donald Trump’s tariffs under the International Economic Emergency Powers Act—for overstepping his authority to ‘regulate’ trade—offer India a chance to wriggle out of commitments under an Indo-US trade deal in the works? Did New Delhi act in haste on this bilateral pact, given that his IEEPA barriers were still under legal scrutiny? Will last week’s ruling end a wild reign of tariffs fired from the hip?
The answer to all these questions is ‘no.’ Nor does the 6-3 majority decision change India’s twin needs to forge closer economic ties with the US and expose India’s economy to greater foreign competition—except in hard-up fields devoid of market dynamism, like large parts of farming. To meet our global ambitions, we need a sharper competitive edge anyway.
What the Ruling Actually Changed
The top US court has struck down Trump’s reciprocal tariffs levied against most trade partners, but he has laws other than the IEEPA at his disposal. He has already invoked Section 122 of the US Trade Act of 1974 for a fresh 15% levy. These can stay in place for 150 days, after which they will need the approval of Congress.
Section 232 of the 1962 Trade Expansion Act lets him retain his metal and auto tariffs in purported defence of US national security. If Trump obtains probe reports of other countries treating America unfairly, he could resort to Section 301 of the US Trade Act; Section 338 of the Tariff Act of 1930 may come in handy too, should a myopic view of trade prevail, one that casts surplus-running partners as villains out to rip America off.
Whatever tools Trump picks, the world can expect further bouts of trade instability. Penal tariffs based on probes that prove hollow in court, for example, could also get turfed out at some point.
The US Domestic Impact
For now, what’s good for America’s institutional backbone is bad for the US economy’s momentum of investment and growth. If it must refund reciprocal tariff charges, its fiscal deficit would widen and put upward pressure on its bond yields. As for America’s trade gap, its 2025 figure has turned out almost the same as 2024’s, which points to inelastic import demand. If Trump’s actual aim is just to reshuffle ports of origin, then his web of bilateral deals could yet play a role.
The tariffs didn’t reduce the trade deficit; they just redirected trade. This is a crucial point. If the goal is to bring manufacturing back to America, tariffs alone won’t do it. Production requires more than protection; it requires investment, infrastructure, and a skilled workforce.
India’s Strategic Calculus
Trade is not a zero-sum game. In theory, barrier reduction aids all sides through efficiency in resource allocation across borders. In practice, tilts cause friction and talks involve give-and-take. India has struck deals with the EU, European Free Trade Association, Oman and New Zealand after Trump began his tariff onslaught last April, before moving to seal one with the US.
By principle, if we let any items enter duty-free, we must let American stuff enter on equal terms. The common policy theme here is trade openness. It speaks of export optimism on the logic that lowering import barriers will cheapen inputs for many factories and pressure various domestic sectors to get into better competitive shape.
The goal should be to lower our industrial cost base; for this, we do not need tariff-rate symmetry with every partner. A trade deal with the US remains a worthy pursuit even if it looks lopsided—to reap the benefits of trade liberalization. To open up is to bet on India’s future.
The China Plus One Context
As ‘China plus one’ plans get drafted amid all this trade flux, we must globalize our economy for its own sake. Capital inflows will need to support this project. This reality doesn’t change either.
The global supply chain restructuring is real. Companies are looking for alternatives to China. India is a prime candidate. But to attract investment, India needs to be open, competitive, and predictable. A trade deal with the US, even an imperfect one, signals that India is serious about integration.
The Deeper Argument
The article’s core argument is that India should pursue trade liberalization not as a favour to the US but as a strategy for its own development. Lowering import barriers cheapens inputs for domestic industry. It pressures domestic sectors to become more competitive. It attracts foreign investment. It integrates India into global value chains.
These benefits accrue regardless of what the US does. They are not conditional on reciprocal tariff reductions. They are inherent in openness itself.
This is a sophisticated argument. It recognises that trade policy is not just about exports; it is about the entire economic ecosystem. Openness forces efficiency. Competition drives innovation. Integration creates opportunity.
The Farm Sector Exception
The article notes one exception: “hard-up fields devoid of market dynamism, like large parts of farming.” Agriculture is different. It involves millions of smallholders who cannot easily adjust to import competition. It involves food security and rural livelihoods. It involves political sensitivity that no government can ignore.
A wise trade policy protects what needs protecting while opening what can be opened. The farm sector may need continued protection; manufacturing and services can benefit from competition.
Conclusion: Stay the Course
India should stay the course on the US trade deal. The Supreme Court ruling changes the tactics but not the strategy. Trump will find other ways to pursue his trade agenda. India’s need for openness, competition, and integration remains unchanged.
The goal is not a perfect deal; it is a deal that moves India forward. Even a lopsided deal can bring benefits if it opens markets, attracts investment, and signals India’s commitment to economic reform. To open up is to bet on India’s future. That bet is worth making.
Q&A: Unpacking the US Tariff Ruling and India’s Trade Strategy
Q1: Does the Supreme Court ruling give India a chance to back out of the US trade deal?
No. The ruling struck down Trump’s use of IEEPA for reciprocal tariffs, but he retains authority under other laws (Section 122, 232, 301, 338). Trade instability will continue. More fundamentally, India’s need for closer US ties and exposure to foreign competition remains unchanged regardless of how Trump pursues his agenda.
Q2: What other tariff tools does Trump have?
Section 122 allows 15% global tariffs for 150 days (needs Congressional approval to extend). Section 232 allows metal/auto tariffs on national security grounds. Section 301 allows tariffs after investigations into unfair trade practices. Section 338 (1930 Act) could be invoked against surplus-running partners. Each has constraints, but all remain available.
Q3: What impact have US tariffs had on the trade deficit?
The 2025 trade deficit was almost identical to 2024’s, suggesting inelastic import demand. Tariffs didn’t reduce the deficit; they just reshuffled ports of origin. If refunds of illegally collected tariffs are required, the US fiscal deficit would widen, putting upward pressure on bond yields. Protectionism has costs even for the protecting country.
Q4: Why should India pursue a trade deal even if it looks lopsided?
Trade liberalization benefits India directly, regardless of symmetry. Lower import barriers cheapen inputs for domestic industry, pressure sectors to become competitive, attract foreign investment, and integrate India into global value chains. As ‘China plus one’ strategies unfold, openness signals India’s readiness. The goal is lowering India’s industrial cost base, not tariff-rate symmetry.
Q5: What is the one exception to trade openness?
“Hard-up fields devoid of market dynamism, like large parts of farming.” Agriculture involves millions of smallholders who cannot easily adjust to import competition, food security concerns, and political sensitivity. A wise trade policy protects what needs protecting while opening what can be opened—manufacturing and services can benefit from competition; farming may need continued protection.
