Authors: Mr. Ashish Chandra (Partner) and Mr. Anupal Dasgupta (Principal Associate)
The Supreme Court of the United States (‘SCOTUS’) in a landmark judgment on 20 February ruled that the tariffs imposed by the Trump Administration pursuant to International Emergency Economic Powers Act (‘IEEPA’) is illegal as the statute does not provide any powers to the US President to impose tariffs. In view of the judgement, the Trump administration has already rescinded the tariffs imposed vide IEEPA but has also come out with alternate measures which has been discussed in this article.
By way of background, tariffs on India can be traced across two Trump administrations through national security measures, withdrawal of trade preferences, and attempted emergency economic authority.
Previously, Indian exports have been affected by sector-based measures under Section 232 of the Trade Expansion Act of 1962. During his first term, in 2018, the U.S. President Donald Trump imposed tariffs on aluminum and steel, on national security grounds, and these measures applied to Indian products as part of a global action. The justification was that the large “excess capacity” in foreign steel and aluminum production could undermine the health and viability of the U.S. domestic industry that underpins national defense readiness. These tariffs still remain in force.
Later, in 2019, the United States terminated India’s eligibility under the U.S. Generalized System of Preferences (‘GSP’) which provided for a nonreciprocal, duty-free tariff treatment to certain products imported to the United States from designated beneficiary developing countries (‘BDCs’), of which India was a beneficiary. As a result, certain Indian goods lost duty-free access and became subject to regular tariff rates under the Harmonized Tariff Schedule.
The second Trump term escalated the experiment. In 2025, the administration turned to IEEPA, a statute historically used for sanctions and asset controls, not tariffs. The White House imposed what it termed “reciprocal” tariffs on multiple trading partners, including India. The policy began with a 10 percent baseline on April 02, 2025, and was ratcheted up through successive executive actions. By early August, the effective reciprocal rate on Indian goods reached 25 percent, subject to sectoral carve-outs such as pharmaceuticals and electronics. Later that month, an additional 25 percent punitive tariff targeted India’s purchases of Russian oil and defense equipment, pushing the effective burden on many exports to 50 percent.
A coalition of U.S. businesses and several states challenged the IEEPA-based tariffs before the U.S. Court of International Trade (‘CIT’). The CIT held that IEEPA did not authorize the President to impose tariffs.[1] The U.S. Court of Appeals for the Federal Circuit affirmed, concluding that tariff-setting is fundamentally a legislative function reserved to Congress, absent clear statutory delegation.[2] The Federal Circuit’s ruling was stayed pending appeal before the SCOTUS.
Last week, on 20 February 2026, the SCOTUS in Learning Resources, Inc. v. Trump, through 6-3 majority confirmed that President Trump does not have authority under the IEEPA to impose tariffs. It was held that imposing tariffs involves a core constitutional power vested in Congress and therefore requires clear and explicit statutory authorization. IEEPA’s language permitting the President to “regulate importation” does not clearly authorize the imposition of duties or taxes. The majority emphasized that Congress has historically used explicit language when delegating tariff authority and has imposed defined procedural and substantive limits in other trade statutes. The absence of such language in IEEPA was decisive. The Court also noted that IEEPA had not previously been used as a tariff statute and that the Government conceded the President has no inherent peacetime authority to impose tariffs.
Unfortunately, the ruling resolved only the question of statutory authority. The Court did not address the operational consequences of invalidating the tariffs, including enforcement issues, refunds, or implementation steps. Those remedial and practical matters were left to subsequent administrative action or further proceedings before the U.S. CIT.
The U.S. Customs and Border Protection (CBP) agency has halted collections of tariffs imposed under the IEEPA at 12:01 a.m. EST (0501 GMT) on Tuesday (February 24, 2026).
Post-IEEPA Reset
After the abovementioned ruling, President Trump has in no uncertain terms mentioned shifting to other existing economic tools to maintain tariff measures.
- Section 122 – Temporary Global Surcharge
Shortly after the ruling, the President invoked Section 122 of the Trade Act of 1974 and a 10 percent global tariff was announced. Further, President Trump further announced an increase to the statutory maximum of 15 percent tariff under Section 122.[3] This surcharge does not replace normal customs duties. Instead, it is added on top of existing Most Favored Nation (‘MFN’) rates under the Harmonized Tariff Schedule. All US Imports (subject to specific exemptions and carveouts) are currently subject to baseline tariff rates plus the 10 percent Section 122 surcharge.[4] The 15 percent tariff level, although threatened, has not yet been formally notified.
Under Section 122, upon determining that large and serious balance-of-payments deficits or imminent currency instability require corrective action, the President may, by proclamation and without a formal investigation, impose a temporary import surcharge of up to 15 percent ad valorem or quotas for a period not exceeding 150 days, subject to congressional extension.
However, the authority is intentionally narrow in scope and duration. It is triggered by “large and serious” balance of payments deficits or related currency concerns, yet it does not provide detailed statutory standards defining what constitutes such a crisis. Its design reflects a short-term stabilization mechanism rather than a durable trade policy instrument. The statutory cap on both rate and duration limits its structural impact, and continuation beyond 150 days requires affirmative congressional action.
Many Economists and trade lawyers were quick to dismantle Trump’s fallback strategy. The pivot to Section 122 of the Trade Act of 1974, a provision never before used to impose general tariffs, rests on statutory conditions that may not exist in today’s macroeconomic environment.
Section 122 authorizes temporary tariffs of up to 15 percent for 150 days to address a “large and serious” balance-of-payments deficit. That language is not casual; it is a threshold requirement. The United States does have a trade deficit. But a trade deficit is not the same thing as a balance-of-payments crisis. The latter refers to a structural inability to finance external obligations.
That distinction is not academic. Section 122 was conceived in an era when the dollar was tied to gold and reserve depletion posed a real threat. Under a fixed exchange rate, sustained deficits could exhaust reserves and destabilize the currency. By the time the Trade Act was enacted in the early 1970s, however, the United States had already shifted to a floating exchange rate. The adjustment mechanism became market-driven, not reserve-dependent.
The legal problem is straightforward: Section 122 is triggered by a fundamental international payments imbalance. The present U.S. macroeconomic position, characterized by deep capital markets and a freely floating currency is very unlikely to meet that condition. A trade deficit, even a large one, may not constitute a balance-of-payments emergency in a floating-rate system.
The statute was designed as a short-term defensive tool for a fixed-rate monetary order that no longer exists. Using it today as a general tariff mechanism, risks running headlong into the same statutory limits that have already constrained Trump’s other executive trade actions.
- Section 232 – National Security Measures
Section 232 of the Trade Expansion Act of 1962 continues to apply independently. It allows tariffs on products that are found to threaten national security after a Commerce Department investigation. Upon a petition or self-initiation, the Department of Commerce investigates whether specific imports threaten national security and submits a report, after which the President to decide and, if concurring, implement appropriate tariff (without a statutory cap) or other remedial measures.
Currently for India – Steel, aluminum, and auto parts remain covered under this authority. These measures were unaffected by the SCOTUS ruling because they are based on a separate statute.
- Section 201 – Safeguard Measures
Under Section 201 of the 1974 Act, safeguard tariffs or quotas can be imposed if a surge in imports injures US industry. The US International Trade Commission determines injury; the president selects the remedy. These measures are temporary, usually up to four years. India exports solar modules, tyres, chemicals, textiles and auto parts – sectors historically vulnerable to safeguard actions.
- Section 301 – Unfair Trade Practices
Section 301 of the Trade Act of 1974 allows the United States to impose tariffs in response to unfair trade practices by other countries. The law allows the USTR to either respond to petitions filed by industry groups or “self-initiate” investigations. It has been used prominently in disputes with China. Following an investigation into China’s intellectual property and technology transfer practices, the Trump administration imposed wide-ranging tariffs on Chinese goods.
It carries procedural requirements like investigation, findings and consultations – but once triggered, it authorizes sweeping tariff retaliation grounded in statutory delegation rather than emergency power.
- Section 338 – Additional or new duties imposed on discriminatory countries
Section 338 of the Tariff Act of 1930 is another option available with President Trump and allows tariffs of up to 50% against countries that have discriminated against U.S. businesses. These tariffs do not explicitly require an investigation or have restrictions on how long they could stay in place, and have never been imposed before, so it’s unclear how any attempt by Trump to use them now will play out.
- Other Trade Remedial Measures
Anti-dumping and countervailing duties (AD/CVD’), as well as quota measures, also remain unaffected by the SCOTUS’ decision. In the United States, the legal basis for antidumping (AD) and countervailing duty (CVD) actions rests primarily on the Tariff Act of 1930. It authorises the Department of Commerce (DOC) to determine whether foreign exporters are dumping goods (selling below fair value) or receiving countervailable subsidies, while the U.S. International Trade Commission (ITC) determines whether such imports materially injure or threaten to injure domestic industries.
Aftermath: IEEPA Tariff Refund Uncertainty
Before the SCOTUS invalidated the IEEPA tariffs, the U.S. government had reportedly collected approximately $175 in duties under that regime.[5] The Court did not prescribe a refund mechanism, leaving the administrative and procedural consequences unresolved. Public statements from President Trump and Treasury Secretary Bessent suggest that reimbursement efforts could become mired in extended litigation, potentially stretching over several years.
Importers seeking recovery must take a disciplined, file-by-file approach: identify all affected entries, confirm whether each entry has been liquidated by U.S. Customs and Border Protection (CBP), assemble entry summaries and proof of payment, determine whether duties were paid under protest, and ensure strict compliance with statutory deadlines.
As a matter of law, duties collected without valid statutory authority are refundable. For unliquidated entries, Post-Summary Corrections may be available. For liquidated entries, a timely protest is typically required; if denied (or deemed denied), further recourse lies before the U.S. Court of International Trade. Correct legal recourse will be important for successful refund claims.
[1] Available at – https://www.cit.uscourts.gov/sites/cit/files/25-66.pdf
[2] Available at – https://www.cafc.uscourts.gov/opinions-orders/25-1812.OPINION.8-29-2025_2566151.pdf
[3] Available at – https://economictimes.indiatimes.com/news/international/global-trends/trump-raises-global-tariff-to-15-from-10-a-day-introducing-new-duties/articleshow/128650038.cms?from=mdr
[4] Available at- https://www.thehindubusinessline.com/economy/indian-exports-to-attract-10-tariff-in-us-for-150-days-from-feb-24-uncertainty-persists/article70666665.ece
[5] Available at – https://indianexpress.com/article/explained/explained-economics/ieepa-tariffs-refunds-10548766/
Disclaimer: This article represents our understanding and interpretation of the relevant laws as on the date hereof and is provided without expressing any opinion, advice, or recommendation. The interpretations set out herein are subject to change, and there can be no assurance that any regulator, authority, or judicial body will concur with or adopt a position consistent with our views expressed in this article. This article is furnished solely for academic and informational purposes and should not be construed as legal advice or relied upon for any purpose whatsoever.
