P Chidambaram writes: Brace for a roller-coaster ride

• Section 122 of the Trade Act, 1974 (which the President invoked);
• Section 232 of the Trade Expansion Act, 1962;
• Section 301 of the Trade Act, 1974 (which the President cited and threatened to launch investigation into several countries’ exports); and
• Section 338 of the Smoot-Hawley Tariff Act, 1930.

As far as India is concerned, post-judgment, the tariff on nearly all goods is at 15 per cent (instead of the 18 per cent tariff announced on February 2, 2026). Under Section 232 of the Trade Expansion Act, the tariff on steel, aluminum, semi-conductors and certain auto-components is at 50 per cent. The tariffs are still high and will affect India’s exports. The government of India said it was examining the situation post-judgment. However, the immediate fallout of the judgment was that both sides agreed that the talks to finalise the text and sign the Interim Agreement may be deferred — without a date being specified!

All are helpless

Meanwhile multiple voices have emerged out of the US Congress. Until the US Supreme Court intervened and quashed the IEEPA tariffs, the Congress was helpless against the Executive’s grab of taxation powers. Even after the judgment, the Congress is helpless because Mr Trump will not go to Congress to ask for authorisation. He believes that he already has the authority from Congress. Besides, there are enough laws on the statute book to sustain the ‘reciprocal’ tariff rates. Many experts believe that the post-judgment tariffs imposed by President Trump may face litigation but they do not need the support of legislation.

The trading partners of the US who entered into agreements recently (mostly to avoid the reciprocal tariffs) are helpless too. India, which signed a Joint Statement on February 2, is also helpless. Mr Jamieson Greer, the USTR, has already made overtures to other countries by saying that ‘no one has met him and suggested that his country would like to walk away from the agreement’. In effect, Mr Greer certified that all countries who had signed trade agreements with the United States were ‘good boys’ — and implied that they should remain ‘good boys’. On his part, Mr Trump warned twice that any country that broke a deal will face harsh tariffs. In effect, if the good boys turned bad boys, they will face retribution. The warning cannot be dismissed as bluff or bluster because Mr Trump acts on his whims and prejudices. He regards tariffs as not mere taxes, but as weapons.

Trade in disarray

Thanks to the Marrakesh Agreement (that replaced GATT) and the birth of the World Trade Organization (WTO) the countries of the world were obliged to follow a regime of rules-based trade. There were disagreements and disputes, but the WTO provided a credible platform for resolution of disputes. WTO ushered in an unprecedented expansion of world trade since January 1, 1995. All that is in disarray, thanks mainly to Mr Trump. Under the threat of harsh reciprocal tariffs, many countries entered into trade agreements with the United States, made huge commitments and gained partial tariff reliefs. Reciprocal tariffs may have gone but the same tariffs have been brought in through other laws and orders. Effectively, therefore, the tariff reliefs secured by other countries have gone up in smoke but the huge commitments made by them remain in place.

President ‘Lula’ de Silva of Brazil was spot on when he said that countries of the world have to band together and stand up to the United States. That is sensible advice, because no country (with the possible exception of China) can alone defy the United States. It is an unequal world and the leader of the most powerful economy is erratic and unpredictable. India has indeed bowed to the will of President Trump; so have many other countries including developed countries like Japan and South Korea.

Domestic Developments

President Trump is unpopular in the United States. His ‘approval’ rating has collapsed to 40 per cent or less. Jobs are scarce. Consumer prices are considered ‘unaffordable’. Inflation is rising. Mr Trump’s anti-immigration plank is popular in the US but it has created a huge backlash because the plank ruthlessly sweeps aside human rights, children’s rights, states’ autonomy and the due process of law. Many Americans opposed to illegal immigration are mortified due to the federal government’s — especially ICE’s — excesses.

The domestic developments could weaken Mr Trump and he may face electoral setbacks in November 2026. The Republicans may lose control of one or both Houses of Congress. That will render Mr Trump’s administration a ‘lame-duck’ with two more years to go. Mr Trump and his Administration may return to the path of rules-based trade and respect for global institutions. Until then, with no feasible options for India, prepare for a roller-coaster ride.