On February 20, the US Supreme Court has declared ‘reciprocal’ i.e. counter tariffs imposed on many countries by President Donald Trump as illegal. These tariffs were imposed under a federal law created in response to a national emergency. The court said that emergency powers cannot be used to justify such big business steps.
Let us know what effect the US Supreme Court’s decision will have on tariffs? Will the US President have to withdraw these tariffs? What will be its impact on India?
Strict trade policy in second term
Immediately after taking the oath of office, Trump had given indications of his strict trade policy. After assuming charge on January 20, 2025, he had made it clear that America’s interests would be given priority. This was his second term and from the very beginning he warned of increasing import duties on many countries. Trump announced the imposition of ‘reciprocal tariffs’ on many countries including China, Canada, Mexico and India. His argument was that strictness is necessary in countries with which America’s trade is unbalanced. However, later relief in these tariffs was also given through negotiations and agreements with many countries.
What is Trump’s reaction?
After this recent court decision, Trump expressed his strong displeasure and called it a disgrace. According to CNN’s report, Trump appeared clearly dissatisfied with the decision during a working breakfast with governors at the White House. He said that his government is already considering other options to deal with this decision. The report states that Trump told the governors present that he had a backup plan ready, through which the tariff measures could be reimposed. He indicated that the administration is exploring alternative legal avenues.
Will America have to return the money?
The Trump administration has not released any official figures on tariff collections since December 14. However, economists in the Penn-Wharton Budget Model estimate that more than $175 billion was collected from tariffs imposed under IEEPA. If the tariffs become invalid after the Supreme Court’s decision, then there is a possibility that America will have to return this amount. However, the situation is not clear on this yet.
Highest tariff on India, again relief
Under the tariff policy, the highest tariff up to 50 percent was imposed on India. An additional 25 percent tariff was added as a penalty for purchasing oil from Russia. But on February 3, Donald Trump announced a trade deal with India. Making a major change, the Trump administration announced reducing the total tariff on India to 18 percent. Besides, 25 percent additional duty imposed on oil purchase from Russia was also withdrawn. Now an interim trade deal between India and America may come into effect in April. To finalize the legal documents of this interim trade agreement, a three-day meeting between Indian and American officials will begin in America from February 23.
Trade deal may be affected
The Supreme Court’s decision has created uncertainty over recent trade agreements with many countries including India. According to analysis by the Global Trade Research Initiative, agreements that were negotiated under the threat of punitive tariffs may now be weakened. For India, which was looking for trade deals in certain sectors amid US tariff pressure, this decision could suddenly change the direction of negotiations. Experts say that now India can reconsider all those commitments which were made in response to America’s threat to impose tariffs, because the legal basis for those tariffs has now ended.
What is the impact on India?
America is one of India’s largest trading partners. The total bilateral trade between the two countries had reached US $ 132.2 billion in the financial year 2024-25 (FY25). If America softens its tariff policy, the global trade environment will improve. Indian companies can get more opportunities in the American market. Especially pharma, textile, auto parts and IT sectors can benefit.
Strategy to reduce dependence on China
In the last few years, America has tried to reduce its dependence on China. If America adopts a balanced and rules-based trade policy, India will benefit from stable trade relations. The global supply chain was affected due to the tariff war. If America withdraws from strict tariff policy, there will be stability in global trade. This is a positive sign for India, which is trying to increase manufacturing and exports.
impact on stock market
If American tariffs are canceled, its impact will be visible on the Indian stock market as well. This will create positive sentiment in the market. The market, which has been under pressure for the last several months, may regain its shine. Indian IT, pharma, auto parts and export related companies can benefit. This can lead to a rise in Sensex and Nifty, but if there is more movement in the American market or the dollar strengthens, then foreign investors can withdraw money, due to which the Indian market can also fall for some time.
Economy will get a boost
This decision is also an opportunity for India’s economy. If America adopts a clean and stable trade policy, then India’s exports can increase and the possibility of a trade agreement between the two countries can be strengthened. Factories, investments and jobs can benefit from this. However, India will have to keep an eye on future policies. Overall, this decision may prove beneficial for India in the long run.
Also read- Now who will have to return America and how much money?
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