What Happened
- The US Supreme Court, in a 6-3 ruling in Learning Resources, Inc. v. Trump, struck down President Trump's tariffs imposed under the International Emergency Economic Powers Act (IEEPA), holding that the Act does not authorise the President to impose tariffs.
- Chief Justice John Roberts wrote that the Constitution "very clearly" vests taxing power — including tariffs — in Congress, not the President; IEEPA's words "regulate" and "importation" cannot be read to include the power to tax.
- Within hours, Trump signed a new executive order imposing a 10% global tariff on all countries under Section 122 of the Trade Act of 1974, effective February 24, 2026, which he subsequently raised to 15%.
- Trump stated that "nothing changes with India," as the India-US interim bilateral trade agreement (BTA) had established a reciprocal tariff of 18%, which remains higher than the new global baseline.
Static Topic Bridges
IEEPA — International Emergency Economic Powers Act (1977)
The International Emergency Economic Powers Act was enacted by the US Congress in 1977 to grant the President authority to regulate international commerce in response to an "unusual and extraordinary threat" to national security, foreign policy, or the economy. It was historically used for financial sanctions, not tariffs.
- Enacted: 1977, as a reform of the Trading with the Enemy Act of 1917
- Presidential powers under IEEPA: Investigate, regulate, or prohibit any transactions in foreign exchange; block foreign-owned property; impose sanctions on foreign persons and entities
- Historical use: Primarily for economic sanctions (Iran 1979, Russia 2014, North Korea, Venezuela); never previously used to impose tariffs
- Trump's application: Declared trade deficits as a national emergency to impose tariffs on imports; first time IEEPA was used for tariff imposition
- Supreme Court ruling (February 20, 2026): 6-3 decision; held IEEPA does not authorise tariffs; Justices Thomas, Kavanaugh, and Alito dissented
- Revenue collected under IEEPA tariffs before invalidation: over $130 billion
Connection to this news: The Supreme Court's ruling that IEEPA cannot be used for tariffs represents a landmark check on executive power over trade policy, forcing the administration to seek alternative legal authority — specifically Section 122 of the Trade Act of 1974.
Section 122 of the Trade Act of 1974
Section 122 of the Trade Act of 1974 authorises the President to impose a temporary import surcharge of up to 15% ad valorem for a period not exceeding 150 days to address "large and serious" balance-of-payments deficits. Unlike IEEPA, this is a trade-specific statute with explicit tariff authority but narrower scope and built-in time limits.
- Maximum tariff: 15% ad valorem (Trump initially set 10%, then raised to 15% — the statutory maximum)
- Maximum duration: 150 days, unless extended by an Act of Congress
- Trigger: Presidential determination of a "large and serious" balance-of-payments deficit (no formal investigation or interagency process required)
- Uniform application: Must apply uniformly to all countries; cannot target individual nations
- Historical precedent: Section 122 had never been invoked for tariff imposition before this action
- Legal vulnerability: Trade experts argue that a balance-of-payments deficit (in the technical economic sense) does not exist for the US, as it runs a capital account surplus that offsets the current account deficit
Connection to this news: The shift from IEEPA to Section 122 imposes structural constraints on the tariff regime — the 15% cap and 150-day time limit mean the administration faces a deadline for either securing Congressional authorisation or finding yet another legal basis.
India-US Trade Relations — Bilateral Trade Agreement Framework
India and the US reached a framework for an interim Bilateral Trade Agreement (BTA) in February 2026, establishing reciprocal tariff treatment and purchasing commitments. This represents the first formal bilateral trade deal between the two countries after decades of negotiations.
- Reciprocal tariff on India: 18% (reduced from the original 25% proposed)
- India's purchasing commitment: $500 billion of US energy products, aircraft, precious metals, technology products, and coking coal over 5 years
- Key tariff reductions for Indian exports: Textile and apparel, leather and footwear, organic chemicals, home decor, machinery; tariff removed on generic pharmaceuticals, gems and diamonds, aircraft parts
- Digital trade: Both sides committed to address discriminatory barriers to digital trade
- Broader context: India's goods trade with the US was approximately $128 billion in FY 2024-25, with India running a surplus
- India's applied tariff rates: Among the highest globally (average MFN tariff approximately 17%), a persistent point of friction
Connection to this news: The BTA's 18% reciprocal tariff rate for India is higher than the new global 15% tariff under Section 122, meaning the BTA terms remain the operative framework for India-US trade regardless of the global tariff action.
Key Facts & Data
- Supreme Court ruling: 6-3 in Learning Resources, Inc. v. Trump (February 20, 2026)
- IEEPA tariff revenue collected before invalidation: over $130 billion
- New global tariff: 10% initially, raised to 15% within a day
- Legal basis for new tariff: Section 122, Trade Act of 1974
- Maximum duration: 150 days (without Congressional extension)
- Maximum rate under Section 122: 15% ad valorem
- India-US BTA reciprocal tariff: 18%
- India's purchasing commitment under BTA: $500 billion over 5 years
- India-US bilateral trade (FY 2024-25): approximately $128 billion