Ever since the US Supreme Court struck down President Donald Trump’s tariffs on Friday, there has been some confusion about how much will India have to pay to Washington.
India and the US are on the verge of finalising the text of an interim trade deal and had already announced an 18 per cent tariff on Indian goods earlier this month, down from 50 per cent previously. But the US Supreme Court’s ruling has left everyone wondering whether the tariffs are now gone.
A fuming Donald Trump quickly moved to sign an order mandating a new 10 per cent tariff on imports from all countries, including India, to replace the ones struck down by the Supreme Court.
He invoked a never-used law, Section 122 of the Trade Act 1974. It gives US presidents the power to impose tariffs of up to 15 per cent for 150 days to address trade imbalances with any country, after which they would need approval from Congress. The 10 per cent tariff will go into effect on February 24.
How much tariff will India have to pay?
When Donald Trump was asked to clarify the tariff rate on India, he said it would remain at 18 per cent, as agreed earlier. However, the White House later clarified that, for now, India would be charged a 10 per cent tariff.
“All countries with trade agreements with the US now drop to a 10 per cent tariff rate temporarily,” a White House official said.
According to the US Supreme Court, the Trump administration could not impose tariffs in peacetime under the five-decade-old International Emergency Economic Powers Act (IEEPA). This effectively removes the legal basis for the 18 per cent reciprocal tariff imposed on India.
So, the effective tariff for India should now stand at 3.5 per cent (the levy in place before Trump’s Liberation Day tariffs) plus the 10 per cent imposed under Section 122 of the 1974 Trade Act, bringing the total to 13.5 per cent. However, there has been no clarity on this from the White House yet.
However, there is no clarity yet about Trump’s new 10 per cent reciprocal tariff after the 150-day period.
It is also worth noting that, according to the White House fact sheet, Section 232 tariffs of 50 per cent on steel and aluminium, and 25 per cent on certain auto parts, will remain.
An Indian government delegation is expected to visit Washington DC next week to seek clarity on the issue.
While the Trump administration may currently be looking at legal avenues to reinstate the 18 per cent tariff on India, the Supreme Court ruling does give New Delhi some room to bargain.
How has India responded?
In the first response to the United States’ Supreme Court’s order striking down the reciprocal tariffs imposed, union minister Pralhad Joshi said on Saturday that the Centre will examine the ruling and either the commerce ministry or the ministry of external affairs will officially react to it.
“I have read in the media that the US top court has given some judgment and the Indian government will study that, and whatever the reaction needs to be given, that will be given by the Commerce Ministry and MEA, not by me,” Joshi was quoted as saying by news agency ANI.
A formal response from India is awaited on the issue.
