U.S. Tariffs, Executive Overreach, and India’s Strategic Trade Choices

The U.S. Court of International Trade ruled that former President Trump’s sweeping global tariffs were unconstitutional and exceeded legal authority under the guise of a "national emergency." Though the ruling was stayed, it holds significant implications for India, which faces increased U.S. tariffs amid ongoing trade negotiations and the proposed One Big Beautiful Bill (OBBB).

U.S. Tariff Regime and Legal Challenge

• Presidential Tariff Orders and Global Fallout: Trump's executive action imposed tariffs ranging from 10% to 135% on imports from over 100 countries, including remote and non-commercial regions like Heard and McDonald Islands, breaching the norms of negotiated trade under WTO commitments.
• Violation of Separation of Powers: The use of executive orders to enforce such sweeping tariffs was termed by the court as upsetting the balance between the legislature, executive, and judiciary, which is fundamental to the U.S. constitutional framework.
• Five Small Businesses Took Legal Stand: Five U.S. SMEs — dealing in wine, plastics, bicycles, musical circuits, and fishing gear — filed a case in the U.S. CIT, asserting that the tariffs harmed their viability and lacked legal basis, leading to the May 28, 2025 judgment.

Fallacies in Trade Deficit Justification and WTO Disputes

• Misconstruing Trade Deficits: The Trump administration used global trade deficits as the basis for tariffs, ignoring that deficits do not inherently harm economic health and excluding U.S. service exports in its calculation, especially to countries like India.
• WTO Rulings on Steel-Aluminium Tariffs: In 2022, WTO panels (on complaints by Switzerland, Norway, China, and Türkiye) ruled that U.S. tariffs on steel and aluminium during Trump’s first term did not qualify under national security exemptions, yet theS. persisted.
• India-U.S. WTO Dispute and its Withdrawal: India filed a WTO dispute against the earlier tariffs but withdrew it in 2023 under a mutually agreed solution with the U.S. However, this did not shield India from additional tariffs (50%) under Trump’s new executive actions.

Strategic Implications for India and the Path Forward

• India Must Safeguard Digital and Visa Interests: India must ensure protection from U.S. retaliation on digital services taxes, 3.5% remittance tax, and H-1B visa restrictions, as these disproportionately affect India’s service trade and diaspora workers.
• Apple Manufacturing Threat Undermines India Advantage: Despite U.S.-China tensions, the Trump administration has threatened to penalize Apple if it shifts manufacturing to India, challenging the narrative that India could benefit from the U.S.-China decouplin
• WTO Alignment and Right to Walk Away: India must insist that any bilateral deal with the U.S. be WTO-compliant, especially on tariffs, remittances, and services, and be prepared to walk away from a sub-optimal trade deal given the potential for reversal of U.S.

Practice Question:

Q. "Discuss the implications of the recent U.S. Court of International Trade ruling on executive-imposed tariffs in the context of global trade norms. How should India balance its strategic and economic interests while negotiating bilateral trade deals with the United States?"