What Happened
- On February 20, 2026, the US Supreme Court ruled 6-3 in Learning Resources, Inc. v. Trump that President Trump's tariffs imposed under the International Emergency Economic Powers Act (IEEPA) are unconstitutional, holding that IEEPA does not authorize unilateral tariff action.
- Chief Justice John Roberts authored the majority opinion, noting that no president before Trump had used IEEPA to impose tariffs and the law does not mention the words "tariff," "duty," "levy," or "tax."
- The Global Trade Research Initiative (GTRI) urged India to reassess its trade agreement with the United States, arguing that the ruling removes the leverage that drove the bilateral deal negotiations.
- The ruling frees approximately 55% of India's exports to the US from the previous 18% reciprocal duty; these goods will now face only standard Most Favoured Nation (MFN) tariffs.
- Following the ruling, the US imposed a temporary 10% across-the-board tariff under Section 122, valid for 150 days, as an interim measure.
Static Topic Bridges
International Emergency Economic Powers Act (IEEPA), 1977
Congress enacted IEEPA in 1977 to limit the emergency economic powers previously delegated to the President under the Trading with the Enemy Act (TWEA) of 1917. Following Congressional investigations that revealed the US had been in a continuous state of emergency for over 40 years, Congress passed the National Emergencies Act (NEA) in 1976 and IEEPA in 1977 to impose checks on executive emergency authority. IEEPA grants the President broad powers to regulate economic transactions after declaring a national emergency to deal with "unusual and extraordinary threats" originating substantially from outside the US.
- IEEPA was designed for financial sanctions and economic restrictions, not trade tariffs
- No president before Trump had used IEEPA to impose tariffs; its primary use was for sanctions (e.g., against Iran, North Korea, Russia)
- The Supreme Court's ruling in Learning Resources, Inc. v. Trump established that IEEPA does not encompass tariff authority
- The ruling reaffirms the principle that tariff-setting power is a Congressional prerogative under Article I of the US Constitution
Connection to this news: The Supreme Court's decision significantly limits executive tariff authority in the US, removing the legal basis for the "emergency" tariffs that shaped the India-US trade negotiations and forcing both countries to recalibrate their bilateral trade framework.
WTO Most Favoured Nation (MFN) Principle
The Most Favoured Nation (MFN) principle, enshrined in Article I of the General Agreement on Tariffs and Trade (GATT), requires WTO member states to extend the same trade terms to all other members without discrimination. If a country lowers tariffs for one WTO trading partner, it must offer the same rate to all members. Exceptions exist for free trade agreements (FTAs), preferential treatment for developing countries, and WTO-authorized retaliatory tariffs.
- MFN is the cornerstone of the multilateral trading system and appears in GATT (goods), GATS (services), and TRIPS (intellectual property)
- WTO-bound tariff rates set the maximum MFN tariff a country can charge; applied rates may be lower
- India's average MFN applied tariff rate is approximately 17-18% (among the highest for major economies)
- The US average MFN applied tariff rate was approximately 3.4% before the emergency tariff escalation
Connection to this news: With IEEPA tariffs struck down, India's exports to the US now face standard MFN tariff rates rather than the punitive reciprocal tariffs, fundamentally altering the cost-benefit calculus of the bilateral trade deal India had negotiated under duress.
India-US Bilateral Trade Agreement Framework
India and the US announced a framework for an Interim Trade Agreement in February 2026, with full Bilateral Trade Agreement (BTA) negotiations launched on February 13, 2025. Under the interim deal, India committed to eliminate or reduce tariffs on all US industrial goods and a wide range of food and agricultural products (excluding dairy, spices, rice, and wheat), purchase $500 billion worth of US products over five years, and halt Russian oil purchases. The US agreed to reduce reciprocal tariffs from 25% to 18%.
- Section 232 tariffs persist at 50% on steel and aluminium, plus 25% on certain auto components (unaffected by IEEPA ruling)
- Products representing about 40% of India's export value (smartphones, petroleum products, medicines) remain tariff-exempt
- GTRI warns that India should "proceed cautiously" since "no deal with the US is ever final"
- GTRI recommends India strengthen partnerships with both Western and BRICS nations to insulate against unpredictable US trade policy shifts
Connection to this news: GTRI argues that since the IEEPA tariff threat that compelled India's concessions has been judicially struck down, India should reassess whether the commitments it made, particularly on Russian oil and the $500 billion purchase pledge, remain strategically justified.
Key Facts & Data
- Supreme Court ruling: 6-3 in Learning Resources, Inc. v. Trump (February 20, 2026)
- IEEPA enacted: 1977; no president before Trump had used it for tariffs
- 55% of India's exports to the US freed from the previous 18% reciprocal duty
- Temporary 10% across-the-board US tariff under Section 122 (valid 150 days)
- Section 232 tariffs remain: 50% on steel/aluminium, 25% on auto components
- India's interim deal commitments: $500 billion US purchases over 5 years, halt Russian oil imports
- India's average MFN applied tariff: ~17-18%; US pre-escalation MFN average: ~3.4%
- Full India-US BTA expected by late 2026 or 2027