Tariffs: Is India eyeing new terms in trade deal with the US?

India has responded to the recent US Supreme Court ruling striking down President Donald Trump’s sweeping global tariffs by putting off a scheduled trade delegation visit to Washington to finalise an interim trade deal.

Clearly, New Delhi has opted to wait and watch in hopes of gaining elbow room to renegotiate better terms before the deal is signed.

That might be tricky given Trump is keen to keep the status quo going, with India “paying tariffs to us, and we are not paying tariffs to them.”

The US court verdict has not spooked financial markets, as was the case when Trump announced his tariff policy last year. Wall Street is staying calm for now.

But underlying the cautious trading is a hunch that the top court’s intervention will not deter the White House from coming up with fresh strategies to weaponise tariffs in the global trading environment.

US trade negotiator Jamieson Greer has signalled the Trump administration will stay the course on its tariff policy.

That appears to be the case as Trump announced a new global tariff under a different statute.

The US top court had ruled in a 6-3 decision that there was no national emergency to justify tariffs under the International Emergency Economic Powers Act (IEEPA), the authority that the Trump administration relied on to impose tariffs on America’s trading partners.

By declaring the Trump administration’s reliance on the IEEPA to impose tariffs as unconstitutional, the US Supreme Court has shifted the onus from the executive branch to the legislative on the question of tariffs. This will likely embolden the US Congress to apply a brake on what many Congressmen see as a reckless course adopted by the White House.

The question that now arises is whether or not the trade deals struck with countries over the past nine months are valid once Congress reviews them.

That uncertainty applies to signed and settled deals with trading partners such as the UK, the European Union, Indonesia, Malaysia, Argentina, Cambodia, Guatemala, El Salvador, Bangladesh and Taiwan.

Trump has sought to circumvent the US Supreme Court ruling by reaching for another statute and imposing, with immediate effect, a global tariff under Section 122 of the Trade Act of 1974. The new tariff is valid for 150 days unless Congress extends it.

Trump also launched fresh investigations into unfair trade practices under Section 301, which means more tariffs are on their way.

But it also means the Trump administration is abiding by the US Supreme Court’s ruling and withdrawing the tariffs imposed under the authority of the IEEPA.

The Trump administration’s retaliatory move binds it to a rules-based trading environment that obliges it to establish grounds of trade malpractice by countries that would justify the imposition of tariffs against them.

But the scrapping of IEEPA tariffs will inevitably spawn lawsuits by companies seeking refunds, estimated at (US) $175 billion. Trump has vowed to fight them in the courts.

America’s trading partners are faced with the choice of renegotiating trade deals or keeping the deals they have. Revisiting the deals risks incurring the wrath of the White House.

India will be assessing where its leverage lies as the Trump administration seeks to recoup from the setback delivered by the US Supreme Court.

Venu Menon is a senior journalist based in Wellington. He was Consulting Editor of The Hindu in India prior to moving to New Zealand.