Last month, the United States and India signed a joint statement outlining a trade deal under which Washington was expected to cut reciprocal tariffs on Indian goods from 25 per cent to 18 per cent within about two weeks, while India was to submit a detailed, product-wise concession list by mid-March. Before that could happen, the US Supreme Court struck down the legal basis for those tariffs, eliminating the leverage Washington had used to secure concessions. This signalled the onset of CALM — collapse of America’s leverage mechanism.
Seeking an immediate alternative, within hours of the ruling the Trump administration imposed a uniform 10 per cent tariff under Section 122 of the Trade Act of 1974, replacing targeted pressure with a flat duty applied equally to all trading partners. With the tariff threat gone, the incentive behind America’s recent and ongoing trade deals has largely disappeared, leaving many countries to question the value of agreements meant to avoid duties that no longer exist.
Over the past year, Washington used the threat of steep “reciprocal tariffs” to push trading partners into rapid agreements, securing market access, procurement commitments and strategic alignment in exchange for lower duties. Negotiated rates were about 15 per cent for the European Union, Japan and South Korea; 20 per cent for Vietnam and Taiwan; 19 per cent for Indonesia, Thailand and the Philippines.
The Supreme Court ruling and the new 10 per cent tariff create a threefold dilemma for US trading partners, including India. The rate is lower than most negotiated levels, the uniform levy wipes out any competitive advantage those concessions were meant to secure, and there is little reason to offer tariff cuts, investment pledges or procurement commitments when the same access to the US market is available without a deal.
The European Commission says new conditions are not conducive to a “fair, balanced, and mutually beneficial” deal and has sought clarification from Washington. Australia’s trade minister called the new tariffs unjustified and said all options were under review, and Canada warned that future commitments must rest on legally durable foundations.
Across capitals, the immediate priority is to understand the durability of US tariff policy before deepening commitments or proceeding with deal ratification.
The legal arsenal shrinks. With the International Emergency Economic Powers Act (IEEPA) off the table, Washington’s tariff options have narrowed considerably. Section 122 of the Trade Act of 1974 has become the US administration’s immediate fallback. It permits temporary tariffs of up to 15 per cent on a global basis, but only for 150 days without congressional approval and without discrimination among countries.
Yet, this authority rests on a weak legal footing. Section 122 was crafted to address balance of payments distress — a condition the US has not faced since the dollar began floating in 1973. For that reason, tariffs imposed under this provision are likely to face legal challenges.
Other available tools are narrower and more procedurally constrained. Section 232 of the Trade Expansion Act of 1962 allows tariffs on national security grounds. It is already used to impose high duties — such as 50 per cent on steel and aluminium — and could soon be extended to more products. However, these tariffs must apply uniformly to all countries, limiting leverage over specific partners.
Section 301 of the Trade Act of 1974 has long been a preferred tool because it permits country-specific action against unfair trade practices. But it requires detailed investigations, proof of harm and remedies proportionate to the violation. It is currently used against China and has been invoked against India over issues such as the digital tax, patent regime and medical device regulations. More countries, including India, could soon face Section 301 investigations. The likely grounds for such probes are outlined in the USTR’s National Trade Estimate Report 2025.
Neither Section 232 nor Section 301 can match the speed or breadth of the discarded reciprocal tariff regime. The era of rapid, country-targeted tariff escalation is now subject to significant legal limits.
The domestic pushback is also growing. Even before the Supreme Court’s February 20 ruling, US lawmakers signalled discomfort. On February 18, the US House of Representatives blocked new tariffs on Canadian goods tied to a dispute over ownership of the Ambassador Bridge linking the United States and Canada. Six Republican senators crossed party lines in opposition, reflecting reluctance to disrupt North American supply chains.
Higher import costs in the US are pushing up prices and squeezing manufacturers that rely on foreign inputs. Industry groups report layoffs and production cuts in import-dependent sectors, while thousands of firms are seeking refunds for duties paid under the invalidated tariff regime.
With the bargaining chip of reciprocal tariffs gone, Washington has shifted from offering tariff cuts to using pressure tactics.
In a social media post, Trump wrote, “Any country that wants to play games with the ridiculous Supreme Court decision, especially those that have ripped off the US for years, will be met with much higher tariffs and worse than which they recently agreed to.” Repeating the warning in his February 24 State of the Union address, he cautioned that attempts to renegotiate could invite stricter measures, saying the legal power “to make a new deal could be far worse for them”. The message is unmistakable:
Preserve current arrangements or risk punitive action.
In the joint statement of February 6, India agreed to remove tariffs on most goods, including many farm products, buy over $500 billion worth of US goods over five years, ease digital rules that restrict US tech firms, and relax other regulations to allow easier entry for American products. India also agreed to align parts of its economic policies with US interests toward third countries. This could limit India’s policy flexibility and strain ties with countries such as China and Russia.
In return, the US agreed to reduce its reciprocal tariff rate to about 18 per cent. But, after the US Supreme Court ruling, all countries — whether they struck a deal or not — now face a uniform tariff. If the same tariff applies without making sweeping concessions, the rationale for such a deal disappears.
For the world and India, the lesson is clear: Until US trade policy regains legal certainty and durability, committing to sweeping concessions risks trading strategic autonomy for benefits that may vanish overnight.
The writer is founder, GTRI
