US Imposes Temporary 15% Tariff: Legal Reset in Trade Policy and Implications for India

Why in News?

After the Supreme Court of the United States struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA), President Donald Trump invoked Section 122 of the Trade Act, 1974 to reimpose trade levies.

He initially announced a 10% universal tariff, later raising it to 15% — the maximum allowed under Section 122. However, the measure is temporary and can remain in force for only about five months unless approved by the US Congress.

Background and Context

The Supreme Court ruling significantly curtailed the President’s ability to impose sweeping tariffs using emergency powers. IEEPA was originally designed for sanctions and asset freezes, not broad-based trade levies.

With that route closed, the administration shifted to Section 122 — a rarely used balance-of-payments provision allowing temporary tariffs up to 15% for 150 days unless extended by Congress.

This marks a shift from executive-driven emergency tariffs to more legally constrained mechanisms.

Impact of the New 15% US Tariff

Countries Better Off Under Flat Rate

Under the temporary flat 15% tariff, several major economies now face lower duties compared to earlier differential and punitive tariffs. These include:

• India
• China
• Japan
• South Korea
• ASEAN nations
• Brazil
• Mexico
• Canada

For many of these countries, the 15% rate is lower than the previously imposed reciprocal or penalty-based tariffs.

Countries Facing Higher Tariffs

Conversely, some countries that earlier faced lower duties may now be subject to relatively higher rates under the uniform structure, including:

• Russia
• Australia
• United Kingdom
• Saudi Arabia
• United Arab Emirates
• Qatar
• Argentina
• Colombia

India’s Position

India had been facing cumulative tariffs of up to 50% since August 2025 due to reciprocal measures and penalties linked to Russian oil imports.

Following a recent trade framework and removal of the oil penalty:

• Indian goods are currently taxed at about 25%.
• Expectations suggest a reduction toward 18%.
• If the flat 15% regime applies fully, India’s relative competitiveness improves compared to earlier punitive rates.

Additionally, around 55% of India’s exports to the US may revert to standard Most Favoured Nation (MFN) rates after IEEPA-based measures were struck down.

China’s Position

China had faced cumulative tariffs of roughly 45%, including reciprocal and fentanyl-related levies under IEEPA.

With IEEPA invalidated, the flat 15% tariff could temporarily place India and China on comparable footing — unless fresh measures are introduced under other statutory provisions.

Supreme Court Ruling Curtails Tariff Powers

The Supreme Court ruling:

• Reaffirmed Congressional primacy in taxation.
• Limited unilateral executive tariff authority.
• Required stricter statutory justification for future measures.
• Potentially triggered refund liabilities for previously collected tariffs.

This weakens the administration’s leverage in trade negotiations, as partners may adopt firmer negotiating stances.

Mounting Legal and Political Challenges

Limited Congressional Path

To restore broader tariff authority, the President would require Congressional approval — difficult given slim legislative majorities and upcoming midterm elections.

Political Risks

• Tariffs have contributed to inflationary pressures.
• Voter sensitivity to price increases complicates aggressive protectionism.
• Party divisions may deepen over trade strategy.

Alternative Tools

The administration may rely on:

• Section 122 (temporary balance-of-payments tariffs).
• Section 232 (national security tariffs).
• Section 301 (unfair trade practices investigations).

However, these involve procedural safeguards and narrower scope compared to IEEPA.

Shifting Trade Dynamics After IEEPA Ruling

Continued Sectoral Tariffs

Section 232 tariffs remain in force:

• 50% on steel and aluminium.
• 25% on certain auto parts.

Meanwhile, about 40% of India’s exports — including smartphones, petroleum products, and pharmaceuticals — remain exempt.

Erosion of Trade Leverage

With reciprocal tariffs struck down:

• US bargaining power in ongoing trade talks may weaken.
• Trade policy shifts from executive-driven to legally constrained frameworks.
• Greater judicial and legislative oversight emerges in US trade governance.

India has reportedly postponed high-level trade engagements to reassess legal and strategic implications.

Significance for India

Short-Term Relief

Lower average tariffs improve export competitiveness.

Strategic Caution

India anticipates that the US may deploy alternative statutory mechanisms.

Trade Diplomacy

The evolving landscape underscores the importance of:

• Diversifying export markets.
• Securing sectoral exemptions.
• Strengthening bilateral trade frameworks.