US Supreme Court Ruling Boosts India's Chances for More Equitable Trade Terms with US
The odds have increased for India to make trade terms with the United States more equitable after the US Supreme Court outlawed the Donald Trump Administration’s sweeping “reciprocal tariffs” for the world, analysts said on Sunday, even as the US President was quick to lambast the verdict, and imposed a 10% baseline tariff to replace ones struck down. The situation was, however, still unfolding, and remained as volatile as it’s ever been since the “Liberation Day” tariff proclamations last April, with Trump insisting that he would turn to other laws to press ahead with his tariffs, and that these “great alternatives” would be “a lot stronger.” The new 10% extra tariff (over MFN rates) will take effect from February 24 and will remain in force for 150 days. For India, this would mean an immediate reduction in reciprocal tariffs from 25%, without offering any trade-related concessions. The 18% tariff for India, mentioned in the February 6 Joint Statement issued by the US and India, was yet to take effect, and the two sides were targeting the interim deal’s roll-out in April, as the new developments muddied the situation. The 10% additional tariffs are for all trade partners of the US as an interim measure, pending Trump administration formulating a response to the Supreme Court ruling that removed country-specific reciprocal tariffs and fentanyl-linked duties. The tariff reduction comes just weeks after the US agreed to cut additional reciprocal tariff on India to 18% from 25%. The joint statement removed the 25% punitive tariff imposed on India for purchasing Russian oil. It also said India agreed to reduce or eliminate tariffs on all industrial goods and “a wide range of” agriculture and food items, and stop purchases of Russian oil. “The joint statement mentions that if either country changes the agreed-upon tariffs, the US and India agree that the other country may modify its commitments. Now that US tariffs have changed, India should use this clause to either opt out of the deal or delay negotiations or seek fresh terms, so that the trade deal looks equitable,” founder of Global Trade Research Initiative Ajay Srivastava said. “Circumstances have changed. The changed situation diminishes the value of the (poposed) interim agreement with the US. There is little justification to persist with the concessions we had agreed to. India needs to recalibrate its position in varous issues in the ongoing negotiatioons with the US,” international trade expert Abhijit Das said. In the interim deal India was negotiating to bring down additional tariffs, but the negotiations should now be on getting the Most Favored Nation (MFN) tariffs removed, Das added. The India-US economic engagement includes a variety of issuers other than tariffs and non-tariff barriers, with Washington keen to extract concessions from India on IPR laws, government procurement etc. The India-US joint statement also states India intends to purchase goods worth $500 billion from the US over five years, while trade experts feel this is difficult to adhere to, given the limited capacity of the US to export items which India needs. An immediate fallout of the invalidation of the reciprocal tariffs is a demand from businesses for refunds of revenues collected by the US Customs through them. PwC estimates revenue collections till October-end at $108 billion, with India’s contribution less than a billion. The countries with whom the US had signed trade deals — like the EU, UK, Japan and Korea — would also pay 10% tariffs even if in the agreements the rates were set at the higher levels, news agencies quoted White House officials as saying. All signed deals are subject to review. Other than 10% tariffs, the US will initiate several investigations under Section 301 of the Trade Act to deal with unfair trade practices by many trading partners, US Trade Representative Jamieson Greer said in a statement. “We expect these investigations to cover most major trading partners,” he said. Additional tariffs under Section 301 require lengthy investigations before tariffs can be imposed. “The uncertainty still persists. We have to ensure that there are no further tariffs on India. We should be constructively engaged with the US so that no other retaliatory action follows. The Bilateral Trade Agreement (BTA) goes beyond tariffs, allowing concessions even on Most Favoured Nation tariffs,” said Ajay Sahai, CEO and Director General of the Federation of Indian Export Organisations (FIEO). A team of officials led by Chief Negotiator on the India-US trade agreement will be in Washington next week to finalise the legal text of the interim trade deal. However, in changed circumstances what would be the focus of the negotiations remains to be seen. The interim deal is a precursor to a full-fledged India-US BTA so the talks would continue, Das added. The new US tariffs have exempted electronics, critical minerals, energy products, pharma products, trucks and heavy duty vehicles, passenger vehicles, and some agriculture products from the additional 10% duties. The products covered by Section 232 of the Trade Expansion Act are steel and aluminium, some auto parts and machinery, copper and raw material including semi conductors. The reduction in US tariffs on India to 10% from 18% has given a immediate boost to the country’s nearly $40-billion textile and apparel export industry, effectively restoring a level playing field with competitors such as Vietnam and Bangladesh seen before the tariff escalation. However, industry players remain cautious about the durability of the gains, noting that India will now have to compete more on non-tariff factors such as scale, delivery quality, and negotiating strength. “India’s competitors like Bangladesh, Vietnam and Indonesia are effectively back on a level playing field,” Prabhu Dhamodharan, convenor of the Coimbatore-based Indian Texpreneurs Federation (ITF), said. “The structure now resembles the pre-disruption phase, albeit with an overall 10% higher cost layer across the board,” he added. Prior to the reciprocal tariffs, India, Bangladesh and Vietnam faced an average of 3.3%–3.4% tariffs in the US under MFN rates. “It’s really good news for Tiruppur for at least the next three years as more US buyers will now return to India,” KM Subramanian, president of the Tiruppur Exporters’ Association, said. The knitwear hub lost over ₹15,000 crore of business in 2025 due to reciprocal tariffs, with the US accounting for more than a third of its $7.7 billion exports in FY25.
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