The End of Broad Executive Tariffs
The U.S. Supreme Court has delivered a landmark 6-3 decision, striking down sweeping reciprocal tariffs previously imposed under presidential executive authority via the International Emergency Economic Powers Act (IEEPA). This ruling effectively frees approximately 55% of Indian exports from duties that had reached up to 50%. These goods will now revert to standard Most Favoured Nation (MFN) tariff rates, which historically average between 2.8% and 3.3% [cite: Source A].This judicial correction removes a significant point of friction from the U.S.-India trade relationship, which saw bilateral trade reach $129.2 billion in 2024. The decision follows months of tense negotiations and escalations, where tariffs were previously doubled to 50% on certain Indian imports. Experts suggest this ruling strengthens India's negotiating position and prompts a review of its existing trade commitments with Washington.
Persistent Sectoral Hurdles Remain
Despite the broad tariff rollback, crucial trade restrictions persist. Section 232 tariffs, enacted under separate national security provisions, remain unaffected by the Supreme Court's ruling. These tariffs continue to apply to strategic sectors, including steel and aluminum at 50%, and auto parts at 25%. These measures, distinct from the now-invalidated IEEPA tariffs, continue to impact approximately 40% of India's export value [cite: Source A].Furthermore, the U.S. administration has indicated a potential shift towards using other legislative tools to maintain trade restrictions, such as Section 122 of the Trade Act, allowing for temporary tariffs up to 15% for balance of payment issues. This signals a sustained strategy of utilizing trade policy as a geopolitical lever, regardless of the legal basis for broad executive action.
Analytical Deep Dive: The Shifting Leverage
The Supreme Court's decision fundamentally curtails the executive branch's unilateral tariff-imposing authority, emphasizing that Congress must delegate such powers explicitly. This creates a more unpredictable trade policy environment, where the durability of future tariff actions depends on congressional action or specific, legislated authorities like Section 232. For American businesses, this means continued uncertainty, as tariffs are now deployed with a more transactional and sector-specific focus, driven by economic nationalism rather than broad diplomatic engagement.Economists widely concur that tariffs, regardless of their origin, ultimately impose a significant burden on domestic consumers and firms, with nearly 90% of the economic impact falling on U.S. entities. This ruling does not alter that fundamental economic reality. While India's bilateral trade with the US reached $129.2 billion in 2024, and its market capitalization stood around $5 trillion in January 2026 (compared to the US's $67.8 trillion), the economic costs of broad tariffs ultimately offset potential gains. The shift in India's IT services exports, with a decreasing share going to the US (52.9% in FY25 down from 54.1% in FY24) and an increasing share to Europe, illustrates the ongoing diversification driven by global trade dynamics.
The Forensic Bear Case: Lingering Policy Uncertainty
The Supreme Court's ruling, while providing immediate relief on certain tariffs, does not signal an end to U.S. trade friction. The continued reliance on Section 232 tariffs for strategically vital sectors like steel, aluminum, and auto parts ensures persistent trade barriers. This division between broad executive tariffs (now invalidated) and legislated sectoral tariffs means that trade policy remains a volatile instrument, subject to geopolitical considerations and potential for future re-imposition through alternative legal avenues.The administrative focus on executive discretion and transactional trade frameworks means that predictability for businesses and trading partners remains a distant prospect. The economic burden of tariffs, largely borne by U.S. consumers and importers, suggests that protectionist measures often fail to deliver net economic benefits, instead contributing to inflationary pressures and supply chain disruptions.