US SUPREME COURT ON TRUMP TARIFFS

US SUPREME COURT ON TRUMP TARIFFS

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.

 

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