Following the US Supreme Court’s decision to overturn former President Donald Trump’s global emergency tariffs, uncertainty has emerged over the tariff rate now applicable to Indian exports.
While Trump has claimed that the previously agreed 18% tariff under a temporary trade deal with India remains unchanged, the White House has clarified that Indian goods will now face a 10% duty – at least temporarily. The shifting positions have created confusion among exporters and policymakers alike.
So what is the actual tariff India faces today – 10%, 13.5%, 18%, 25%, or even 50% in certain sectors? Let’s break down the tariff math.
Background: The 18% Trade Deal Tariff
Earlier this month, India and the Trump administration had reached a temporary trade understanding under which Indian goods would face an 18% reciprocal tariff. This was a reduction from the earlier 25% rate.
The adjustment came after Trump withdrew an additional 25% tariff that had been imposed on India over its purchase of Russian Oil. Trump had claimed that New Delhi would scale back energy trade with Moscow, prompting the removal of the extra levy.
The trade agreement was expected to be formally signed in mid-March, locking in the 18% rate.
The Supreme Court’s Ruling Changes the Equation
However, the US Supreme Court ruled that Trump could not rely on the five-decade-old International Emergency Economic Powers Act (IEEPA) to impose tariffs during peacetime.
This effectively removed the legal basis for the 18% reciprocal tariff applied to India and several other countries.
In theory, this ruling should have reverted India’s tariff rate back to its earlier Most Favoured Nation (MFN) duty of 3.5% – the baseline rate that existed before Trump’s emergency tariff action.
Trump’s Response: A New 10% Tariff Under Section 122
Reacting swiftly, Trump invoked Section 122 – a rarely used trade provision that allows a US president to impose tariffs of up to 15% for 150 days without immediate congressional approval.
Under this authority, he introduced a blanket 10% tariff on imports from all countries, including India. The measure is scheduled to take effect on February 24.
Despite this move, Trump publicly stated that India would continue to pay the previously agreed 18% rate under the trade deal.
What the White House Says
The White House later clarified that, legally, countries with trade agreements – including India – would temporarily fall to the 10% tariff rate.
According to officials, all such countries are now subject to the 10% tariff under Section 122 while the administration explores new legal avenues.
This has raised another question: does India now pay 10% alone, or 3.5% (MFN) plus 10%, making the effective rate 13.5%?
No official clarification has yet been provided on whether the MFN base rate stacks on top of the 10% Section 122 tariff.
| Scenario | Legal Basis | Effective Tariff on Indian Goods |
|---|---|---|
| Pre-Trump (MFN Rate) | Standard WTO MFN | 3.5% |
| Trade Deal Tariff | Reciprocal agreement | 18% |
| Section 122 Tariff | Temporary executive action (150 days) | 10% |
| MFN + Section 122 (Theoretical) | 3.5% + 10% | 13.5% (Unconfirmed) |
| Sectoral Tariffs (Auto/Steel) | Section 232 | 25% (auto parts), 50% (steel & aluminum) |
Sector-Specific Tariffs Still Apply
A White House fact sheet confirmed that Section 232 tariffs remain in force. These include:
- 25% on certain auto parts
- 50% on steel and aluminum
These sector-specific duties operate independently of the broader reciprocal or Section 122 tariffs.
What This Means for Indian Exporters
For now, the effective working assumption is that Indian goods face a 10% tariff under Section 122, at least for the next 150 days.
This is a significant reduction compared to the 18% rate under the unsigned trade agreement and far below the earlier 25% reciprocal tariff.
Exporters in labour-intensive sectors such as textiles, diamonds, and manufacturing may find temporary relief in the lower rate. The United States remains India’s largest export destination, making tariff clarity critical.
An Indian government delegation is expected to visit Washington, DC, next week to seek clarity on the tariff structure and explore options.
India’s Commerce Ministry stated that it has taken note of the US Supreme Court ruling and Trump’s subsequent comments and is currently examining the implications.
Scenario 2: If the 18% Trade Deal Is Restored
US officials have indicated that the Trump administration is exploring alternative legal mechanisms to reinstate the 18% tariff rate agreed upon in the trade deal.
Trump himself has insisted that “nothing changes” and that India will continue paying tariffs under the agreement.
If the administration successfully restores the 18% reciprocal rate through a new legal route, Indian exports could once again face higher duties.
However, the Supreme Court’s ruling may strengthen India’s negotiating position in ongoing talks, potentially creating room for concessions or revisions.
The Bottom Line
As of now, the most legally defensible and operational tariff rate on Indian goods appears to be 10% under Section 122 – unless clarified otherwise by the White House.
However, the situation remains fluid. With legal, political, and trade negotiations all in motion, Indian exporters must prepare for multiple scenarios.
The next 150 days will be crucial in determining whether the 10% rate holds, the 18% deal returns, or a new tariff framework emerges altogether.
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