What Happened
- On February 6, 2026, the US and India announced a framework for an interim bilateral trade deal, reducing the US reciprocal tariff on Indian goods from 25% to 18%
- The deal was premised on the IEEPA (International Emergency Economic Powers Act) authority, under which President Trump had imposed sweeping reciprocal tariffs on trading partners
- On February 20, 2026, the US Supreme Court struck down IEEPA-based tariffs in a 6-3 ruling, holding that IEEPA does not authorise broad peacetime tariff imposition without explicit congressional approval
- As a result, India's effective tariff rate reverted — countries that had agreed interim deals under IEEPA are now subject to a 10% global tariff under Section 122 of the Trade Act of 1974, which Trump invoked immediately after the ruling
- Trump subsequently raised the Section 122 tariff to 15% for all countries; India's negotiated 18% rate thus became moot pending alternative legal implementation
Static Topic Bridges
IEEPA (International Emergency Economic Powers Act, 1977)
IEEPA grants the US President sweeping economic powers during a declared national emergency, including the authority to regulate international commerce, freeze assets, and impose sanctions. It was enacted as part of the International Emergency Economic Powers Act of 1977, separating peacetime economic emergency powers from wartime powers under the Trading with the Enemy Act (1917). The Trump administration invoked IEEPA to declare a trade deficit as a "national emergency" and impose reciprocal tariffs globally.
- Enacted 1977; administered by the Office of Foreign Assets Control (OFAC) under the Treasury Department
- Prior use: sanctions regimes (Iran, Russia, North Korea), asset freezes, export controls — not broad tariff imposition
- The Supreme Court's February 20, 2026 ruling (6-3, Chief Justice Roberts writing) held that IEEPA does not authorise economy-wide import tariffs as a peacetime tool
- The ruling does not affect other tariff authorities (Section 232, Section 301, Section 122)
Connection to this news: The India-US interim deal reducing tariffs to 18% was anchored in IEEPA authority. With that authority invalidated, the specific 18% rate cannot be maintained under the same legal basis without congressional action or a new authority.
Section 122 of the Trade Act of 1974
Section 122 allows the US President to impose an import surcharge of up to 15% for up to 150 days to address a "large and serious United States balance-of-payments deficit." It requires only a presidential determination — no formal investigation or interagency process — making it the fastest available tariff authority after the SCOTUS ruling.
- Part of the Trade Act of 1974, enacted to codify presidential trade powers
- Cap: 15% tariff; Duration: 150 days (can be extended with Congressional action)
- Does not require findings of unfair trade practices (unlike Section 301)
- Immediately invoked by Trump on February 20, 2026 at 10%, raised to 15% the next day for all countries
Connection to this news: After the Supreme Court struck down IEEPA tariffs, Trump shifted to Section 122 as the fallback authority, imposing a 15% tariff on all countries including India — below the previously negotiated 18%, creating a complex recalibration of the bilateral trade deal.
Section 301 of the Trade Act of 1974 and India-US Trade Relations
Section 301 authorises the US Trade Representative (USTR) to investigate and respond to unfair foreign trade practices that burden US commerce. Unlike IEEPA or Section 122, it requires a formal investigative process and findings of specific unfair practices before action can be taken. The USTR announced new Section 301 investigations against major trading partners, including India, in the wake of the SCOTUS ruling, signalling that tariffs on India may be restructured on a new legal footing.
- Section 301 has been the basis for major tariff actions (e.g., China tariffs imposed in 2018 following a 301 investigation on IP theft)
- Does not cap tariff levels; can be targeted at specific sectors
- India has historically been subject to 301 scrutiny over pharmaceutical pricing, data localisation, and e-commerce regulations
- Distinguishable from Section 232 (national security-based; Trade Expansion Act 1962) which remains unaffected by the SCOTUS ruling
Connection to this news: New Section 301 investigations against India could serve as the legal vehicle for restoring or restructuring higher tariffs on Indian goods that can no longer rely on IEEPA authority.
India-US Bilateral Trade: Structure and Composition
India is the US's eighth-largest goods trading partner. The trade relationship is characterised by a significant goods trade deficit in India's favour (approximately $45 billion) balanced partially by a services surplus in the US's favour. The interim deal's industrial tariff cuts and India's commitment to purchase $500 billion in US products (energy, aircraft, technology, coking coal) over five years represent a structural shift in the relationship.
- India's goods exports to US: approximately $90 billion annually (pharmaceuticals, textiles, gems, machinery top categories)
- US goods exports to India: approximately $45 billion (crude oil, aircraft, defence equipment, semiconductors)
- India agreed to eliminate or reduce tariffs on US industrial goods and agricultural products (DDGs, tree nuts, fruit, wine, spirits, soybean oil) under the February 6 framework
- The deal does not constitute a full Free Trade Agreement (FTA) — it is an interim framework, distinct from a comprehensive FTA requiring congressional approval under US law
Connection to this news: The SCOTUS ruling creates uncertainty about the interim deal's implementation timeline but does not nullify the political commitment or the structural trade rebalancing India agreed to under the framework.
Key Facts & Data
- US reciprocal tariff on India under IEEPA: 25% (pre-deal), reduced to 18% under February 6 framework
- February 20, 2026: SCOTUS strikes down IEEPA tariffs (6-3 ruling, Chief Justice Roberts)
- Section 122 tariff imposed post-ruling: 10% initially, raised to 15% (for all countries including India)
- India's goods trade surplus with US: approximately $45 billion
- India's commitment under interim deal: $500 billion in US product purchases over 5 years
- Section 122 duration limit: 150 days (expires approximately July 24, 2026 unless extended)
- USTR initiated new Section 301 investigations against major trading partners (February 21, 2026)
- Section 232 tariffs (steel: 25%, aluminium: 10-25%) remain in force — not affected by SCOTUS ruling