The US Supreme Court ruling against tariffs imposed by US President Donald Trump has paused Indian talks on a trade agreement. An Indian delegation was set to finalise an interim trade deal in Washington, DC, later this week. The agreement was to include a reduction in tariffs from 50% to 18%, among other concerns.
On February 20, the court held that Trump cannot invoke the International Emergency Economic Powers (IEEP) Act to impose such tariffs.
Trump has used the IEEP to impose extensive tariffs on Mexico, Canada, China, India and other countries. The Act can be invoked at a time of “unusual and extraordinary threat”.
In a 6-3 ruling, the court also observed that Trump has no inherent authority to impose tariffs under the IEEP during peacetime.
Reacting to the court’s ruling, Trump announced a uniform 10% to 15% global tariff under section 122 of the country’s Trade Act, which comes into effect from February 24. The move allowed him to undercut approval from the US Congress.
What is the IEEP?
“Enacted in 1977, IEEPA gives the President economic tools to address significant foreign threats,” the Supreme Court observed.
When acting under IEEPA, the president must identify an “unusual and extraordinary threat” to US national security, foreign policy, or economy. The threat must primarily originate from outside the US. He also has to declare a national emergency under the country’s National Emergencies Act.
The Trump administration attempted to justify its tariffs by invoking the IEEPA in 2025.
They claimed that the US faced a drug trafficking crisis and trade deficits. These two issues were termed “unusual and extraordinary” threats. Trump then imposed tariffs to deal with each supposed ‘threat’.
How the Act was invoked
Trump alleged that an influx of drugs from Mexico, Canada and China had led to a “public health crisis”. He imposed a 25% duty on Canadian and Mexican imports and a 10% duty on Chinese imports through a series of executive orders and presidential proclamations.
The US president also claimed that trade deficits had “led to the hollowing out” of the American manufacturing base and “undermined critical supply chains”.
He imposed “reciprocal” tariffs on dozens of countries regardless of any extant trade agreements. India was hit with 50% tariffs.
The judgement
The US Supreme Court heard consolidated petitions from two parties — Learning Resources and VOS Selections. Both argued that the IEEPA does not authorise reciprocal or drug-trafficking tariffs. The plaintiffs include small businesses and 12 US states.
The court held that the president enjoys no inherent authority to impose tariffs during peacetime.
The court also said that the IEEPA was used to “effect a sweeping delegation of Congress’s power to set tariff policy.” This move allowed Trump to impose tariffs of unlimited amounts and duration on any product from anywhere, the court pointed out.
Further, the court observed that the Trump administration had mainly relied on just two words in the Act: ‘regulate’ and ‘importation’.
“Based on two words separated by 16 others in section 1702(a)(1)(B) of IEEPA, the President asserts the independent power to impose tariffs on imports from any country, of any product, at any rate, for any amount of time,” the court said.
“Those words cannot bear such weight,” the court added.
The IEEPA does not even include the word ‘tariff’, The Dispatch pointed out. The article also highlights the history of power abuse and taxation by English monarchs before US independence, adding that the country’s Constitution is framed to prevent a president from similarly holding such absolute power.
Now over 900 small businesses in the country have signed a letter to the US Congress, demanding tariff refunds. According to an estimate acquired by Reuters, USD 175 billion might be owed in refunds.
India-US trade deal
On February 2, Trump announced that the US had reached a trade agreement with India. Taking to Truth Social, he referred to Prime Minister Narendra Modi as one of his “greatest friends”.
“He [Modi] agreed to stop buying Russian oil and to buy much more from the United States and, potentially, Venezuela,” Trump further wrote.
However, India has not confirmed this. It was not mentioned in the joint statement issued by both countries on February 6 either.
Ahead of the Supreme Court ruling, an Indian delegation was supposed to go to Washington, DC, to reach an interim trade agreement based on what was said in the statement.
According to the statement, India was to eliminate or reduce tariffs on all US industrial goods and a wide range of US food and agricultural products, including dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts and fresh and processed fruits, among others.
The US was set to cut reciprocal tariffs from 50% to 18%. Textiles and apparel, leather goods, generic pharmaceuticals, gems and diamonds and more would have been subject to this reduction.
India was to receive a preferential tariff rate quota for automotive parts. Both countries agreed to provide each other with preferential market access in certain sectors.
The statement also said that India had agreed to eliminate “restrictive” import licensing procedures and not impose restrictions on US-made Information and Communication Technology (ICT) goods for a period of six months, subject to possible revisions.
India agreed to address “long-standing non-tariff barriers” to the trade in US food and agricultural products as well.
The statement further said that India intends to purchase USD 500 billion worth of US-made energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next five years.
While these were widely criticised in India, it is now uncertain how the agreement will proceed.
Reports say both countries have deferred trade talks to “study the implications” of the Supreme Court’s ruling.