US President Donald Trump has announced plans to impose a 10% global tariff under Section 122 of the Trade Act of 1974, which allows the president to levy duties of up to 15% for a period of up to 150 days. Any extension beyond this timeframe would require approval from Congress, according to The Guardian.
Trump also said his administration would invoke Section 301 to launch investigations aimed at shielding the United States from what he described as unfair trade practices by foreign countries and companies.
A major setback to Trump’s aggressive trade strategy came on Friday when the US Supreme Court ruled that the sweeping global tariffs imposed under his administration are illegal. In a 6-3 decision, the Court held that the International Emergency Economic Powers Act (IEEPA) does not give the President the authority to impose tariffs. The court drew a clear line between emergency powers and trade policy.
For India, the ruling is a “mixed bag” of relief and strategic manoeuvring. The US had earlier imposed a total effective tariff of 50% on Indian goods. This comprised 25% punitive duty imposed specifically due to India’s continued purchase of Russian oil and 25% reciprocal tariff. Earlier this month, this tariff rate was cut down to 18% after New Delhi and Washington finalised a trade deal.
According to think-tank GTRI, nearly 55% of India’s exports to the United States will avoid the proposed 18% reciprocal duties after the verdict.
The Court’s decision effectively dismantles Trump’s country-specific “reciprocal tariffs” as well as additional duties linked to fentanyl-related enforcement measures on imports from key trading partners.
Trump calls ruling a ‘disgrace’
Trump has termed the US Supreme Court’s ruling a “disgrace” during a White House breakfast with US governors.
According to two people familiar with his remarks, as quoted by CNN, Trump told those present that he already had a backup plan in mind following the court’s decision. Administration officials had earlier prepared the president for the possibility of an adverse ruling, assuring him that alternative ways existed to pursue his trade agenda even if the tariffs were invalidated.
Will India be impacted by the ruling?
The ruling also invalidates the 10% to 50% “emergency” tariffs that were affecting nearly $80 billion of Indian exports. Sectors that were on the edge, such as textiles, gems and jewellery, pharmaceuticals, and IT services, may see an immediate drop in costs. Additionally, Indian companies that already paid these duties may now be eligible for billions in refunds through US Customs, as per reports.
Are Indian companies eligible for refunds?
Any company—including Indian exporters or US-based importers of Indian goods—that paid duties specifically under the IEEPA authority is now legally entitled to seek a refund.
The Supreme Court directed these claims to the US Court of International Trade (CIT). The CIT will oversee the refund process, which will be administered by US Customs and Border Protection (CBP).
This only applies to the IEEPA “reciprocal” tariffs. It does not apply to tariffs levied under other laws, such as Section 232 (Steel/Aluminum) or Section 301, which remain in effect.
The India–US trade deal was formally announced on February 2 when both sides released a joint framework for an interim trade agreement after extensive negotiations, including a phone call between Prime Minister Narendra Modi and US President Donald Trump outlining tariff cuts and future bilateral trade cooperation.
What’s next in ‘Plan B’ for Trump?
With most of its tariffs, barring those imposed on steel and aluminium, struck down, Trump has options like using Section 122 of Trade Expansion Act of 1974. He could use Section 122 to maintain a 15% tariff for 150 days. This would give officials time to set up longer-term tariff plans. “Replacing IEEPA tariffs with a blanket 15% rate could lead to a modest short-term reduction in the effective rate, but much will depend on whether current trade agreements and sector exemptions are upheld,” Nora Szentivanyi, senior global economist at JP Morgan stated.
Trump had also suggested that he could convert IEEPA tariffs into import licenses. In an interview with the New York Times in January, he said, “I have the right to license.” The law allows the president to regulate imports “by means of instructions, licenses, or otherwise,” which was discussed during oral arguments before the Court.
According to Bloomberg’s analysis, Trump has at least five alternative statutes he could use to impose tariffs now.
These include, Section 232 of the Trade Expansion Act of 1962 (Permits tariffs for national security threats.)
Another one is Section 201 of the Trade Act of 1974 (Lets the president impose tariffs if imports cause serious injury to US industries.)
The third option is Section 301 of the Trade Act of 1974 (Authorises tariffs against countries that discriminate against US businesses or violate trade agreements.)
The fourth one is Section 122 of the Trade Act of 1974 (Addresses balance-of-payments problems, allowing tariffs without federal agency review.)
And the last, Section 338 of the Smoot-Hawley Tariff Act of 1930 (Allows tariffs against countries imposing unreasonable or discriminatory trade practices.)
Most of these alternatives, however, cannot be rolled out instantly. Many require investigations, public hearings, or consultations with affected countries. This means any tariffs imposed under these statutes would be more limited and slower than the IEEPA tariffs.
The Constitution states the power to set tariffs is assigned to Congress. But Trump used IEEPA, which does not specifically mention tariffs but allows the president to “regulate” imports and exports when he deems there to be an emergency due to an “unusual and extraordinary threat” to the nation.
It remains to be seen if Trump takes legal action to thwart Supreme Court’s ruling.