What Happened
- A day after the US Supreme Court struck down his IEEPA-based tariffs, President Trump imposed a new 10% flat global tariff, which he raised to 15% the following day (February 21, 2026)
- The new 15% tariff is imposed under the Trade Act of 1974 — a separate statutory authority not invalidated by the Supreme Court ruling
- Indian exporters, who had faced reciprocal tariffs as high as 26% under IEEPA, now face a lower but still significant 15% duty
- India's Commerce Ministry issued a statement acknowledging the development and indicating a "wait and watch" approach while monitoring the situation
- While Indian exporters welcomed the reduced duty compared to the earlier IEEPA-based tariffs, uncertainty over the final trade deal framework remains a key concern
- Steel and aluminium tariffs under Section 232 (25% and 10% respectively) remain in force, unaffected by the ruling
Static Topic Bridges
India's Trade Policy Framework — Ministry of Commerce and DGFT
India's trade policy is administered by the Ministry of Commerce and Industry through the Director General of Foreign Trade (DGFT) and the Commerce Ministry's trade division. The government periodically reviews and updates its Foreign Trade Policy (FTP), which governs export promotion, import duty structures, and special economic zone incentives.
- Foreign Trade Policy: Currently governed by FTP 2023, valid from April 2023 with rolling reviews
- Key instruments: Export Promotion Capital Goods (EPCG) scheme, Advance Authorisation, Duty Drawback, Remission of Duties and Taxes on Exported Products (RoDTEP)
- RoDTEP: Replaces the older Merchandise Exports from India Scheme (MEIS), refunds embedded taxes and duties on exports; rates notified sector-wise; relevant to textiles, pharmaceuticals, engineering goods
- DGFT administers India's import-export licensing, anti-dumping duty recommendations, and trade remedy measures
- India's Commerce Ministry has ongoing negotiations on the BTA (Bilateral Trade Agreement) with the US
Connection to this news: The shift in US tariff rates from 26% to 15% directly affects the competitiveness of Indian goods, and the Commerce Ministry's response signals India's intent to pursue the BTA negotiation despite the post-ruling uncertainty.
Special and Differential Treatment (SDT) Under WTO Framework
The WTO framework, including the General Agreement on Tariffs and Trade (GATT) principles, prohibits arbitrary discriminatory tariff treatment among members. The US tariff actions — both the IEEPA-based and the new Trade Act-based tariffs — raise questions about WTO consistency, particularly the Most-Favoured Nation (MFN) principle.
- MFN Principle (GATT Article I): Requires WTO members to extend the same tariff treatment given to any one country to all other WTO members — a 15% "global" tariff applied uniformly may satisfy MFN formally, but sector-specific or country-specific variations may not
- GATT Article XXI (National Security Exception): Allows WTO members to take measures necessary to protect essential national security interests — the US has invoked this for Section 232 steel/aluminium tariffs
- WTO Dispute Settlement: India filed WTO dispute settlement cases against US steel and aluminium tariffs in 2018; Section 232 security exceptions complicate these disputes
- Special and Differential Treatment (SDT): Developing countries like India can seek SDT provisions, but these do not override bilateral tariff negotiations
- India's WTO-bound tariffs on many agricultural items are above applied rates, giving the US negotiating leverage
Connection to this news: The WTO consistency of Trump's 15% global tariff under the Trade Act of 1974 will be a subject of multilateral scrutiny, with India likely monitoring the situation before escalating to WTO disputes.
Exchange Rate and Export Competitiveness
A country's export competitiveness is determined not only by tariff levels but also by the real effective exchange rate (REER), production costs, and non-tariff barriers. Even with a 15% US tariff, India's exporters may remain competitive if the rupee depreciates or if US inflation makes Indian goods relatively cheaper.
- India's REER (RBI measure): A high REER implies the rupee is stronger in inflation-adjusted terms than the exchange rate suggests, making exports more expensive for foreign buyers; RBI monitors and publishes REER monthly
- RBI intervenes in the forex market to prevent excessive rupee appreciation/depreciation — a weaker rupee benefits exporters but increases import costs (particularly oil)
- India's current account deficit: typically $25–30 billion annually, largely driven by energy imports; a weaker rupee widens this deficit
- Competing exporters: Bangladesh (15%+ tariffs under previous IEEPA regime), Vietnam, and China face similar or higher US tariffs — India's relative position has improved
- Key sector sensitivity: Textiles/apparel and gems/jewellery are highly sensitive to even 2–3% tariff differentials; pharmaceuticals (generics) are less sensitive as they are demand-inelastic
Connection to this news: The 15% tariff level needs to be evaluated alongside exchange rate dynamics and competitor tariff levels to fully assess the net benefit or cost for India's export sectors.
Key Facts & Data
- IEEPA reciprocal tariff on India (now struck down): up to 26%
- New Trump global tariff (Trade Act of 1974): 15% (revised from 10% announced on February 20, 2026)
- Section 232 steel tariff: 25% — still in force for Indian steel exports
- Section 232 aluminium tariff: 10% — still in force
- India–US bilateral trade FY25: US$ 132.2 billion; India surplus: US$ 40.82 billion
- India's goods exports to US (FY25): US$ 86.51 billion
- RoDTEP scheme: provides sector-wise duty refunds to improve competitiveness
- India's top US export categories: pharmaceuticals (~$10 billion), textiles/apparel (~$7 billion), gems/jewellery (~$9 billion), engineering goods
- WTO dispute: India's 2018 WTO case against US Section 232 steel/aluminium tariffs remains pending