What Happened?

  • The S. Supreme Court gave a 6–3 judgment and struck down President Donald Trump’s emergency tariffs.
  • These tariffs were imposed under the International Emergency Economic Powers Act (IEEPA), 1977.
  • The Court said the President cannot use emergency powers to impose broad trade tariffs without approval from Congress.
  • However, after this setback, Trump imposed a 15% global import surcharge for 150 days under Section 122 of the Trade Act, 1974.
This has major implications for:
  • S. Constitutional System
  • Global Trade
  • India–U.S. Trade Relations

MAIN CONSTITUTIONAL ISSUE

Who has the power to impose tariffs?

  • The S. Constitution gives power to levy taxes and tariffs to Congress.
  • Trump used IEEPA (emergency law) without Congressional approval.
  • The Court ruled this was executive overreach.
This case highlights Separation of Powers:
  • Congress makes tax and trade laws.
  • The President cannot replace Congress in trade matters.
The judgment strengthened Judicial Review and limited Executive Authority.

ABOUT IEEPA

  • Passed under President Jimmy Carter.
  • Mainly used to:
    • Freeze foreign assets
    • Impose sanctions
  • It does not clearly mention tariffs.
Trump became the first President to use IEEPA to impose wide trade tariffs. TRUMP’S TARIFF STRATEGY Tariffs were used as:
  • A Revenue-Generating Tool
  • A Pressure Mechanism
  • A way to Renegotiate Trade Deals
Countries targeted:
  • China
  • Canada
  • Mexico
  • India
  • Brazil
“Liberation Day” Tariffs (April 2025)
  • Announced Reciprocal Tariffs.
  • Justified under National Emergency due to trade deficit.
  • Linked to Fentanyl Trafficking and Migration

ECONOMIC IMPACT

  • Around $175 billion collected under IEEPA tariffs.
  • Record customs duty collection in 2025.
  • Possible refund liability after Court ruling.
  • Increased market uncertainty and volatility.
If the verdict was fully implemented, average tariff could fall from 15% to around 8%. LEGAL CHALLENGES Tariffs were challenged by:
  • Small Importing Businesses
  • 12 U.S. States
  • Other affected groups
Court clearly stated: Emergency powers cannot substitute legislative trade authority.

NEW DEVELOPMENT: 15% GLOBAL TARIFF SURCHARGE

  • After the IEEPA setback, the administration invoked Section 122 – Trade Act, 1974.

Key Features of Section 122:

  • Allows temporary surcharge up to 15%
  • Valid for 150 days
  • Used to address Balance of Payments issues
Trump imposed a 15% ad valorem surcharge on global imports (earlier 10%). It applies to all countries including India.

COMPARISON OF TARIFF RATES

  • Under IEEPA: Around 22%
  • After Court Verdict (without surcharge): Around 8%
  • New Surcharge: 15%
India benefits compared to earlier high tariffs. But India loses opportunity for much lower 8% tariff. GOODS EXEMPTED FROM 15% SURCHARGE Exempted sectors:
  • Strategic and Technology Goods
  • Critical Minerals and Metals
  • Energy Products
  • Aerospace Products
  • Electronics
  • Pharmaceuticals
  • Vehicles and Auto Components
  • Certain Agricultural Products
This shows U.S. Supply Chain Dependence.

IMPACT ON INDIA

Positive
  • Tariff reduced from 18–22% to 15%.
  • Relief in sectors like:
    • Aircraft Parts
    • Auto Components
Negative
  • Expected tariff reduction to 8% did not happen.
  • Pressure on:
    • Engineering Goods
    • Textiles
    • Chemicals
India’s Commerce Ministry is assessing impact.

IMPACT ON INDIA USA TRADE DEAL

  • India and the U.S. are negotiating an Interim Trade Agreement.
  • New tariff situation changes dynamics:
  • S. signalled India will continue paying tariffs.
  • S. may demand greater market access.
  • Tariffs used as negotiation leverage.

Key issues:

  • Market Access
  • Rules of Origin
  • Supply Chain Diversification

OTHER TARIFF TOOLS AVAILABLE

Section 301 – Trade Act, 1974
  • Used against Unfair Trade Practices
  • Investigation-based
  • Earlier used against India (Digital Services Tax, 2020)
Section 232 – Trade Expansion Act, 1962
  • Tariffs on National Security Grounds
  • Sector-specific (Steel, Aluminium, Automobiles) India still faces
Section 232 tariffs on:
  • Steel
  • Aluminium
  • Automobiles
  • Copper Products

KEY CHALLENGES

  • Frequent policy changes cause Unpredictability.
  • Temporary tariffs affect Long-Term Contracts.
  • Rise of Economic Nationalism.
  • Tension between Executive and Judiciary.
  • Instability in Global Supply Chains.

WAY FORWARD

For India
  • Speed up India–U.S. Trade Agreement.
  • Diversify exports (EU, ASEAN, Africa).
  • Strengthen Domestic Manufacturing.
  • Follow WTO-Consistent Trade Diplomacy.
For Global Trade
  • Promote Rule-Based Trade System.
  • Reduce Unilateral Tariff Actions.
  • Strengthen WTO Reforms.