On February 20, 2026, the Court in a 6:3 ruling, that the International Emergency Economic Powers Act (IEEPA) does not authorise the President to unilaterally impose tariffs. The decision invalidated the IEEPA based reciprocal tariffs that had pushed combined US duties on many Indian goods to as high as 50 percent. Within hours, while speaking from the White House, Donald Trump said, “We have alternatives – great alternatives and we’ll be a lot stronger for it” and responded with a substitute flat 10-15 percent global surcharge under section 122 of the Trade Act 1974, capped by statute at 150 days. The chain of events indicates that while the emergency is over, uncertainty is clearly not.To understand what Indian exporters actually gain, the math matters. Before the ruling, the IEEPA based regime had layered a reciprocal tariff onto the standard MFN rate, pushing duties on engineering goods, textiles, leather, and gems toward 50 percent.
The India‑US interim trade framework, announced on February 7, 2026, had already brought it down to 18 percent for most categories, with zero‑duty access carved out for diamonds, pharmaceuticals and some aircraft parts.
Post‑ruling, the 10-15 percent Section 122 surcharge plus an average MFN base of roughly 2.8-3.3 percent means the effective US tariff on most Indian goods now falls in the 13-18 percent band, with an average effective rate of about 13.4 percent, according to estimates by the Global Trade Research Initiative (GTRI).
“The structural disadvantage Indian exporters faced on price competitiveness with Vietnam or Bangladesh narrows, but does not disappear,” said Russell A. Stamets, partner at Circle of Counsels. “After the new 10% global surcharge under Section 122 of the Trade Act of 1974, the net effective relief for most Indian goods is in the range of 15–18 percentage points. Even that is contingent on how quickly US Customs processes refunds to American importers.”
“Indian exporters previously faced up to 50 percent tariffs under IEEPA, reduced to 18 percent via the recent US‑India trade deal. The Supreme Court’s ruling has dropped duties to a temporary 10–15 percent global surcharge under Section 122, plus baseline MFN rates around 3.5 percent. This yields an effective relief of 3–32 percentage points, covering 55 percent of exports like engineering and textiles, though refunds remain uncertain and temporary for 150 days,” said Alay Razvi, managing partner at Accord Juris.
The IEEPA emergency mechanism which was opaque, unilateral, unchallengeable at speed is now gone. What remains is a set of statutory tools including sections 122 and 301 of the Trade Act 1974 and section 232 of the Trade Expansion Act of 1962, each carrying notice periods, fact finding requirements and defined timelines that allow companies requisite time to respond.Section 232 tariffs on steel, aluminium, derivative products, and automotive parts remain in force, along with broader national security based measures on autos, trucks, and other sectors identified by the US Commerce Department, meaning exporters in these fields don’t get much relief from this IEEPA ruling. Similarly, ongoing Section 232 investigations into polysilicon and related technologies, plus national security framed probes on semiconductors, ensure that Indian exporters in these areas continue to face duty risk even after the IEEPA based surcharges are rolled back.
“The US tariffs are an ever‑changing, fluid situation changing regularly, so there cannot be a restructuring based on the tariffs. Any restructuring has to allow flexibility. Till there is clarity on tariffs and the refund of reciprocal tariffs already collected, we cannot suggest investment in US‑oriented supply chain infrastructure,” said Pankaj Chadha, chairman of EEPC India.
“Exporters must build continuous, scenario‑based compliance and supply chain playbooks that allow them to pivot as authorities shift. That entails rigorously classifying goods under the Harmonised Tariff Schedule, maintaining detailed documentation of entries affected by invalidated tariffs to support refund claims once Customs publishes guidance, and closely monitoring import protocols to ensure compliance with the tariffs that now include Section 122 rates alongside enduring sector‑specific duties,” said Gautam Mohanty, Advocate, New Delhi.
Margins, Pricing Power, and Who Captures the Relief
The ground‑level pricing impact of the ruling divides across sectors. In commoditised categories, basic textiles, standard engineering goods, footwear, US importers could use the tariff reduction as leverage to extract lower FOB prices from Indian suppliers, rather than passing the relief through to end consumers or sharing it with exporters.
“Switching from 18–50 percent IEEPA tariffs to a 15 percent surcharge cuts landed costs by 3–35 percent, boosting EBITDA 5–12 percent for US‑heavy sectors like auto components and gems. Pricing power rises marginally as uniform global rates erode India’s prior edge over Bangladesh and Vietnam, enabling 2–5 percent hikes in textiles and chemicals without volume loss,” said Razvi.
“The reversal narrows the relative advantage India had briefly secured under the India‑US Trade Deal framework. Under that framework, Indian goods were subject to an average tariff of 18 percent, compared to approximately 19–20 percent imposed on several other South and South East Asian economies,” said Jayati Chitale, partner at Chitale & Chitale Partners. “Although the differential appeared modest, even a one to two percent gap can translate into meaningful long‑term competitive gains in export‑driven sectors. The present recalibration therefore dilutes that incremental edge.”
“For sectors like pharmaceuticals and generic the reduction to a 10% baseline tariff significantly eases cost-of-goods pressure on US distributors, which could translate into faster volume growth,” said Stamets. “However, Indian exporters whose US customers absorbed the IEEPA tariffs through price increases now have room to either recapture margin or offer competitive price reductions to win back market share lost to domestic US producers or tariff-exempt suppliers.”
“The changes in the reciprocal tariffs being declared illegal and now a global tariff of 10 percent is an advantage to Indian exporters since it puts them on a level playing field with exporters from other countries. However, this may change if President Trump introduces tariffs under Section 301,” said Chadha.
The Trade Deal Dilemma
The ruling arrives in the middle of an ongoing negotiation. The India‑US interim framework had already chalked out some meaningful concessions like zero duty on certain diamonds, pharmaceuticals, and aircraft parts, and an 18 percent cap across a large share of Indian exports. Commerce and Industry Minister Piyush Goyal has met with US Commerce Secretary Howard Lutnick and US Ambassador to India Sergio Gor to explore ways to deepen trade ties between India and the United States. Earlier, when asked about resuming trade talks with the US, Goyal replied, “As soon as there’s more clarity in the situation.” Whether India should now reopen the deal, wait, or simply let the 150‑day window run out before committing to a final agreement is perhaps the most strategically fraught question which this ruling raises.
“While a lower tariff rate is commercially positive, uncertainty is not. Companies are unlikely to recalibrate long‑term contracts or capital allocation strategies based on a short‑duration arrangement that could shift again depending on domestic political developments in the United States. The broader lesson is that trade volatility, not tariff levels alone, is now the central risk,” said Chitale.
“Indian officials have publicly indicated they are ready to resume trade talks once there is clarity on US tariff policy, rather than abandon the agreement altogether. India is likely to keep the deal on the table while using the tariff ruling as negotiating leverage to secure more predictable and reciprocal market access,” said Mohanty.
Every expert cited in this piece circles back to the same number – 150 days. Section 122 of the Trade Act of 1974 limits balance of payments justified surcharges to 150 days without congressional approval. That window opened on February 20 expires around mid July 2026. Between now and then, India needs to either finalise the trade deal or build enough negotiating architecture to survive any other change that follows.
