US Supreme Court Reverses Trump Tariffs: Impact on India
Indian exports previously facing 25%-50% tariffs will now largely drop to a uniform 10% (plus MFN), levelling the playing field
On February 20, 2026, the US Supreme Court delivered a landmark 6-3 verdict, ruling that the President lacks the authority to impose reciprocal tariffs under the IEEPA. This decision effectively resets the trade landscape between India and the United States.
In this special edition of The Core Report, financial journalist Govindraj Ethiraj talks with Ajay Srivastava (Founder, GTRI) and Krishan Arora (Partner, Grant Thornton Bharat) to analyse the fallout.
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TRANSCRIPT
Govindraj Ethiraj: And welcome to The Core Report's weekend edition and a special edition at that. On the 20th of February, that's on Friday night effectively, the US Supreme Court ruled that the President does not have authority under the International Emergency Economic Powers Act, that's the IEEPA, to impose reciprocal tariffs on imports. Now the tariffs had been imposed, as we know, on imports from multiple countries, including of course India, and the reasons that were cited were trade deficits and national economic threats.
And that's really where it went to the Supreme Court. The larger issue of course is whether the President had the authority to impose these tariffs and the Supreme Court has said unequivocally that he does not have those powers and those tariff powers rest with the Congress in the United States. Now, this of course is on the legal part which concerns us but not fully because what we are trying to assess is really the impact of this on India's exports and where this could go.
Remember, the last deal that we know of involves India or other exports from India being tariffed at 18%, whereas imports from the United States being tariffed at 0%, there are lots of exceptions there, but this is the broad agreement that was arrived at, the fine print of which we are still waiting for. Anyway, so as we dive into this, joining me now is Ajay Srivastava, the founder of the Global Trade Research Initiative in Delhi, and he's already put out a note as he usually does quite quickly. So we'll go through that.
But Mr. Srivastava, broadly, you know, some time has passed because there was some confusion in the beginning whether the 18% will apply or will it be the new 10% global tariffs that Trump subsequently talked of, or is there some other opt out or carve out? So where do we stand now?
Ajay Srivastava: So on 28th of August, starting from 28th of August, our goods were facing 50% tariff. Then on 7th of Feb this year, Mr. Trump removed the tariffs, 25% tariffs, he was imposing on us for bipartisan tariff. So the remaining tariffs were 25%, we paid 25% tariffs and we agreed in the joint statement of our ATM trade deal that the US will cut these tariffs to 18%, but that has not yet been implemented.
So today we are paying 25% tariffs, our goods are paying 25% tariffs, and these tariffs will come down to 10% from Feb 24th, after three days.
Govindraj Ethiraj: So you're saying that they will come down to 10% basis, the Supreme Court ruling in the US? Yes. And there is no ambiguity on that?
Ajay Srivastava: No, there is no ambiguity on this because the Supreme Court removed all the tariffs on the same day, that is yesterday, Mr. Trump introduced another tariff, this 10% tariff. Tariff should have been zero, tariff should have been only the MFN normal, regular MFN tariffs, but over and above, Mr. Trump, as soon as the Supreme Court judgement came that reciprocal tariffs have to go, he introduced a new tariff under a new act, which again will be contested very soon. That is 10% for five months, it started from Feb 24th.
So it is not because of the Supreme Court judgement, because of the Supreme Court judgement, there would have been no tariffs except for the MFN tariffs. But since Mr. Trump introduced new tariffs, there are 10% for the whole of the world, not only in India, from Feb 24th, that means tariffs, 25% charge on us will become zero. In lieu of that, 10% tariffs will be applicable from Feb 24th.
Govindraj Ethiraj: Right. And I'm going to come to how this impacts the industries that we usually look at, which is the labour intensive industries, which have faced the brunt of this. But let me get another voice in very quickly from Krishan Arora, the indirect tax national leader and partner at Grand Fountain Bharat.
And I asked him basically about how this would impact from a tax point of view and a tax incidence point of view, Indian exporters.
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Krishan Arora: The decision reverses the Trump's reciprocal global tariffs, which were enacted under the IPA, which is the International Emergency Economic Powers Act of 1977. In effect, this impacted all of US trade partners, including India, indicating that the President Trump will no longer be able to impose these wide ranging emergency based duties without any approval from the Congress. So the effect of that basically is the several actions of the President to impose these tariffs ultimately, which can not be termed to be part of the emergency powers under the IPA is something which the quotas actually emphasise.
So if it is basically put into effect, the impact of that is that the tariffs, the capability of the President to actually impose tariffs at least under the IPA will not be there is what this ruling says. And whatever has been the negotiation basis, whatever has been happening with various countries, including India, and we recently had a, you know, one tranche of that negotiation, which happened to reduce the tariffs to 80% is something which also will be part of this discussion and that tariff should not be applicable if this holds true from now on. So potentially, all the tensions between partners, including India, Canada, Mexico, China, all of that ultimately will almost be invalidated in that sense, at least on the reciprocal tariffs under the IPA.
Now, having said that, there is also news that President Trump has already declared his intention to implement a 10% global tariff under the different legal frameworks which he's, you know, he's entitled to implement as of now, which can reintroduce certain uncertainty again, as to what will be the net impact of that and which kind of products on sectors will still get covered. Because there are certain products which are covered under the national emergency under these different acts. And that's something we need to still see what will be the overall landscape of that.
But this additional tariffs, which he's trying to look at from different legal recourses which is available to them under other legislations is still open. So which means that the topic is still not fully over. But I think there is part of this is right now, that these tariffs, at least on the 18% front, which were as high as 50, are not here to stay.
These tariffs, if they are overturned today, means that one, we need to see whether they will be applicable retrospectively or prospectively, right? But the powers which are given and which have been executed, and if it has been done away with by saying that President Trump did not have the power to do all of this without the Congress approval, means that that approval was never there. So one technical interpretation of that could be that there was no authorisation to do these things earlier as well.
So almost $175 billion of US tariff collection, which is being talked about in this case, is actually a potential refund, because this decision should get actually implemented. From the perspective, this was actually a power which was never allowed to be executed, right? So the open part to this is that there is a possibility of refund, which can be negotiated, which will be something which has to be passed on.
But there's also a concept of unjust enrichment, which means that if you've collected something in the name of a tax levy, or a tariff or a duty, and it has been passed on to the end consumer as a cost, which means that in this case, the prices of the goods which were ultimately at which they were purchased by, you know, US buyers has already had the tariff amount incorporated in that. So that test has to be looked at from the perspective of giving the refund back, then showing that that money has also been refunded back to the end consumer is a very difficult proposition. So I think it's easier said than done to me.
But if there is a discussion which happens around it as a negotiation between Indian exporters to the US buyers, it has to be looked at from the tests which have to be applied because this is a test, which is typically a test which has to be passed on for any grant of refunds, or giving money back which has been collected wrongly, ultimately should have had the effect of also being giving it back to the consumer of those goods.
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Govindraj Ethiraj: Right. So let's begin with that, Mr. Srivastava. So refunds from your experience, is that a possibility if this $160 billion were to be given back in some way?
Ajay Srivastava: Yeah, refunds are being talked in the next three to five months in a time frame. But I think details have yet to be burned out. What we are hearing is that many of the importers, some lawyers approached them on behalf of some big person, and they bought that refund papers already.
Say they were to get $100 worth of refund, the papers were sold at the rate of say $10, $20 only. So some people are already purchasing future refunds. So that means some big legal batteries are waiting.
And refunds will be there.
Govindraj Ethiraj: That's an interesting options market for future refundables. So you said that about 55% of India's exports to the US will be freed from punitive tariffs. And how does this contrast with what it was a month ago?
Ajay Srivastava: So if we have to understand these tariffs, we have to divide our exports to US into three categories. The first category is where reciprocal tariff is 25%, 50% per livid. This is where most of our livid exports come.
So these are tariffs which have been outlawed by the Supreme Court. These will become zero. And on these only, Mr. Trump has imposed 10% additional. Now what about remaining 45%? About 39-40% are products like smartphones, like petroleum products, like medicines. They are tariff exempt for the whole of the world, not only in India.
They will remain there. So there is no problem with it. And the next 5-6-7% are Section 232 tariffs like steel, aluminium, where the whole of the world pays 50%.
And auto components where the world pays 25%. These tariffs will continue. So essentially, we'll be benefiting with, at most to us, those 55% exports of mostly livid goods.
The tariffs will be 10% plus MFN. For example, if tariff on jeans and shirts is 12%, MFN tariff is 12%, now it will be 12% plus 10% is 22%. Earlier it was 12% plus 25% is 37%.
Govindraj Ethiraj: What is the 7%?
Ajay Srivastava: So we say the reciprocal tariff today on Indian products is 25%. This is in addition to the MFN tariff of 12% on shirts. So 12% plus 25% is 37% we are paying.
But the new tariff regime applicable from 2024, it will be 12% MFN plus 10%, so 22% and it's the same for the whole of the world. So it restores the WTO primacy here. WTO says one of the cardinal principles of WTO is that a member country like US cannot charge different tariffs for the same product from different countries.
For example, US is charging different tariff rates for different countries. No, US WTO says it's violating the cardinal conditions, primary condition of WTO. Now with the Supreme Court ruling and US charging 10% uniformly on everyone, it restores the primacy of the WTO to some extent that the US will be charging equal tariff for same product from everyone.
Govindraj Ethiraj: So the 0% which applies to electronics and food products and pharmaceuticals, now that is not touched by this whole, just to reiterate, that is not touched by this judgement, right?
Ajay Srivastava: So there is a caveat here. Today the agreement only speaks about direct with only reciprocal tariff, not this section 232 tariff. So these are not touched, but there is a caveat that today, suppose there is no tariff on electronic components, say electronic products like smartphone.
But Mr. Trump says that he will be negotiating, deciding later on. And these are outside reciprocal tariffs. Today they are zero.
Tomorrow what are the tariffs? We don't know.
Govindraj Ethiraj: But this is something that the administration wanted, which obviously is to give zero in all these cases. I mean, for example, tea exports from India are not tariffed. Okay.
And the section 232, which includes auto components, steel and aluminium, those are at a much higher level, isn't it? Which was not the case last year.
Ajay Srivastava: So, no, no, it was the case last year also. They are outside the reciprocal tariff regime. Different act covers them.
50% uniformly.
Govindraj Ethiraj: When I say last year, I mean before April 2025.
Ajay Srivastava: April 2025 also, 50% tariffs on these. These are continuing from the Trump first term, when steel tariff for 25%, he raised it to 50% later. So steel, aluminium, copper 50% today and some of the auto components 25%.
These continue as it is.
Govindraj Ethiraj: Okay. Now, if we were to look at exports from India, you've said now that it's a completely uniform playing field. Now, it seems like that should be good news, because it goes back to where we were pre April 2025.
Or is there something that one has to read or wait for the fine print?
Ajay Srivastava: No, there is no fine print. I can't think of any fine print. We are going to pre April 2025 plus 10% of course, but it's equal on everybody.
Govindraj Ethiraj: So we'll live with that. And just a question, in your understanding of some of these categories, how competitive are we today if all other factors are constant? Let's say we are neither at an advantage nor at a disadvantage as we were for a few months.
Ajay Srivastava: So the competitiveness position as it existed in April 2025, it remains the same.
Govindraj Ethiraj: Okay. If you were to look ahead, where could the tariff agreement discussions go? Will those discussions slow down?
Will it get re-architected in some way? What essentially could happen next?
Ajay Srivastava: So we have a one pager as grant statement, which both the India and US agreed to move forward in the free trade agreement, February 6. It promises two things that America will be lowering its reciprocal tariffs from 25% to 18%. And we will be offering so many concessions on tariff and non-tariff in so many areas.
Now, even if we don't do that, we got 10%. And with the trade deal, after giving so many concessions, we were getting 18%. Now we are getting 10% like the world gets it.
So why give any concessions now? The logic for trade deal falls here. It falls here.
I appear to understand there is still no logic in the trade deal. We have to find reasons to believe that it will be good for us. Right now, with the current development, there is no logic for the trade deal.
Govindraj Ethiraj: So that's very interesting. So all the negotiations that have happened all these months, including the politics in it and around it, you're saying could be negated because we can just throw that paper away.
Ajay Srivastava: Yeah, but India is not responsible for that. It's a good development that the U.S. Supreme Court has brought us to this happy situation. This is a happy situation for us because the U.S. was pressurising India to agree to so many things in which we were uncomfortable. Now all those things are gone. And if we look at things with the objective eye, there is no need for a trade agreement with the U.S. right now. Why are we going for the trade agreement?
Because the U.S. imposed 50% tariffs on us. Now when tariffs are not there, only 10% on the whole of the world. Where is the need for the trade deal?
I think most of the trade deal will fall through. India, of course, has not entered. We were only talking.
Even the U.S. has not implemented the 18% thing. But the countries which have implemented, like Japan, like South Korea, Malaysia, Indonesia, all one-sided deal, I think they will falter soon.
Govindraj Ethiraj: And there were also other commitments. For example, India is supposed to buy $500 billion of American goods, obviously high value goods. Earlier it was a commitment.
Now it's an intention. But either way, we are supposed to, in good time, buy or import $500 billion. So do those things also get…
I mean, can we forget about it? Or how will India approach this or likely to approach this?
Ajay Srivastava: It's a package. If we do a trade deal, we have to do all those things. We have to agree whether it's worth.
No, it's not worth. It's very clear. We were getting 18% after taking so much pain.
Now we're getting 10% without pain.
Govindraj Ethiraj: And you feel that, I mean, this is someone who's been on a negotiating table. You feel that the U.S. will honour the Supreme Court's judgement to letter and spirit and therefore will not put pressure on countries like India or Japan or other countries with whom it has had bilateral trade deals to do other things for them.
Ajay Srivastava: So U.S. has honoured, U.S. President has honoured the judgement. But he has gone ahead. He respected the judgement.
He didn't contest that. But he took next move by imposing 10% tariffs. Of course, he's using big act again.
And he may be in trouble soon. And somebody will be again going to the courts for even removing these tariffs. But he respected the judgement.
He took his own actions. And people say that it will be difficult for him to use any of the available act for universal tariffs like reciprocal tariffs put on all of the world. Now he can target some countries with sanctions like he targeted Iran or Russia or he may target any country.
It could be any country. It can be us also. But he doesn't have a universal tool.
He has used like IPA. He doesn't have none of the existing remedies. They provide universal tools.
He will have to target countries, country by country, some investigations needed. And most of them may not survive. But of course, Trump being Trump, we don't rule out that he may be threatening certain countries.
We should be ready for that. That if you don't do a deal, then we'll do this, we'll do that. We should be ready for that.
Govindraj Ethiraj: Right. And last set of questions. So what's the larger takeaway from this whole episode as you look back?
Of course, we don't know whether it's ended and we should be forming conclusions. But if you were to look and take away the two, three broader lessons, and when I say broader, I mean for the economy, for the exporting community as a whole, what should that be? Because I mean, equally, we should not be taking away the wrong lessons.
Ajay Srivastava: First is why the US is a superpower. Of course, Mr. Trump's action belies that. But why their institutions still work.
The Supreme Court, so much pressure on them. Even lower courts, they went against the president and ruled. Supreme Court also, after delaying, they ruled very nicely, properly against this.
So their institutions work. And last week on Wednesday, House of Representatives, where Republicans have majority, they ruled against Trump on Canada. So as if they were giving a message to the Supreme Court that, look what the House of Representatives wants.
Should not be scared. Whatever is good, do that only. And you know, these six Republicans, they crossed the floor and voted against the bill.
So I think all of the world sees this. Of course, it has to come from the US side. That's a great relief.
But no country in the world except China could resist these tariffs, could speak. The US, most of us remain silent. Big powers like European, Japan, South Korea, everybody became silent.
So it is from within the US that reforms have come. So heads off to the US.
Govindraj Ethiraj: Right. And you mentioned China, because China was where this whole tariff tirade started. So China also now obviously comes on par with everyone else or back to on par.
Yes, China is back to MFN plus 10% tariff.
Ajay Srivastava: Because China was imposed two tariffs. One is the reciprocal tariff and then Fentanyl tariffs, separately China and Canada and Mexico. So now it's both reciprocal and Fentanyl tariffs are gone.
Chinese are getting MFN plus 10%.
Govindraj Ethiraj: Right. Mr. Srivastava, thank you so much for joining me. And also thank you to Krishan Arora for joining me.
Ajay Srivastava: Thank you very much. Thank you.
