US Trade Policy in Turmoil After Landmark Court Ruling Spreads Global Tariff Impact

Tariff Regime Update: Implications for India's Export-Driven Sectors

Key Developments

On February 20, 2026, the US Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose general tariffs. In response, the Trump administration pivoted to Section 122 of the Trade Act of 1974 to maintain trade leverage.

New Tariff Regime

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The new tariff regime is centered around Section 122, which allows the US President to impose a temporary import surcharge of up to 15% to address "balance-of-payments deficits." This tariff is layered on top of existing duties, with most imports subject to:

• 15% global surcharge under Section 122
• Most-Favoured-Nation (MFN) duty rates
• Sector-specific levies under national security provisions (Section 232)
• Tariffs in response to unfair trade practices (Section 301)

Impact on India

India is one of the biggest gainers from the new tariff regime, with the global tariff rate better than the interim US-India trade tariff of 18%. Most textile imports into the US are subject to their normal MFN duty rates and now face a 15% global surcharge under Section 122. This makes the 15% surcharge the dominant duty element.

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Sector-Specific Implications

• Textiles and Apparel: Most textile imports into the US are subject to their normal MFN duty rates and now face a 15% global surcharge under Section 122.
• Steel and Autos: Sector-specific levies under national security provisions (Section 232) remain in force, with no 15% cap and no built-in expiration.
• Export-Driven Sectors: The new tariff regime adds an extra layer of complexity and uncertainty for India's export-driven sectors, including textiles, steel, and autos.

Timeline

• April 2, 2025: The "Liberation Day" tariff regime was launched, imposing broad "reciprocal tariffs" on nearly all imports using the IEEPA.
• February 20, 2026: The US Supreme Court ruled that IEEPA does not authorize the President to impose general tariffs.
• February 21, 2026: The Trump administration pivoted to Section 122, imposing a 10% global tariff and raising it to 15% within a day.