In through the out door? Mechanisms may change, but Trump regime's goal to reshape global trade remains same

Synopsis

The US Supreme Court's recent decision to invalidate global tariffs has thrown a wrench in Donald Trump's economic strategy, providing a sigh of relief for some stakeholders. However, the President is undeterred and is actively pursuing other legal avenues to maintain his tariff regime. This creates a challenging political atmosphere for Republicans gearing up for the midterm elections.

Seema Sirohi, ET CONTRIBUTORS

US Supreme Court's decision last Friday, declaring global tariffs illegal, strikes at the heart of Donald Trump's foreign and economic policy agenda. And restores some shine to the court while putting a few speed bumps in the president's attempt to use tariffs as an all-purpose weapon. But the decision doesn't prevent Trump from deploying other legal means and continue using tariffs as the preferred weapon of mass disturbance. It's not Liberation Day quite yet.

The court's decision will not end the world's misery because a tariff by any other name would hurt the same. Trump has several vehicles to continue down a similar road. Schadenfreude is not advised. But search for answers is. Within hours of the judgment, he announced a 10% across-the-board tariff on all countries, and soon upped it to 15% - the maximum allowed under Section 122 of the 1974 Trade Act - to signal his determination. The White House expected a negative judgment, and was prepared.

What does it mean for India? First, the decision makes reciprocal tariffs illegal, which in India's case were settled at 18% in the recent arrangement. The newly announced 15% brings the figure down, but it's not clear whether other statutes will be used to reinstate the previous rate. Does the uncertainty give Delhi room to renegotiate and claw back some ground? Yes, if you are willing to take a chance with someone who can act out of pique.

Some say India should have waited until the Supreme Court judgment that was coming and widely expected to go against the White House. It's a legitimate question, but the sequence of events wasn't of Delhi's choosing. Trump called (securing an India deal before the verdict was politically smart, or his ambassador Sergio Gor pushed hard for a win) and Narendra Modi picked up the phone.

The waters could muddy again because Delhi may consider the entire basis of the understanding shaky in light of the court's verdict, even though Trump insisted the deal with India stands. 'Nothing changes. They will be paying tariffs and we will not be. This is a reversal of what it used to be....' He implied he alone could get the better of Modi who he said was a great negotiator.

The court has only taken away Trump's right to use the 1977 International Emergency Economic Powers Act (IEEPA), a law the president interpreted in the broadest possible manner to launch a tariff war against countries and create a luscious revenue stream. The law, stretched beyond reason, became a tool for diplomatic and economic coercion. Tariffs went up if he didn't like a certain leader's tone (Switzerland), and went down when a leader was servile (Pakistan). Economic emergency wasn't the basis for percentages determined and tariffs applied.

With IEEPA gone, Trump is ready with options even if the

US Trade Representative(USTR) would need to work harder to operationalise them. Over the years, the US has assembled an array of legal weapons for

trade negotiations. Within hours of the court's ruling, the toolbox was already open. Treasury secretary Scott Bessent declared tariff revenue in 2026 will remain 'virtually unchanged' because the administration will 'invoke alternative legal authorities to replace the IEEPA tariffs'.

Trump used Section 122 meant to deal with balance-of-payment problems for the latest 15% across-the-board tariffs. The statute, unlike some others, doesn't require an investigation, but has a time limit of 150 days unless the US Congress votes and extends the time.

The latest executive order also directs USTR to use Section 301 of the Trade Act to investigate 'unreasonable and discriminatory acts, policies and practices' of other countries. India has been a target of Section 301 in the past. The process has many steps, including review of petitions and public hearings. Tariffs can stay for 4 yrs or more, depending on various calculations and goodwill of those in charge.

There's no shortage of legal provisions - some use 'national security', others, 'threat to domestic industry' - as a trigger. The deadliest might be Section 338 of the Tariff Act of 1930, which allows up to 50% tariffs on countries that discriminate against US trade and commerce via regulations or other measures. No investigation is required, only a determination by the US International Trade Commission that can inform a president's decision whether a country is discriminating against US products.

No president has ever used Section 338. Trump didn't mention it in his order but Stephen Miller, an influential aide, did in an aggressive appearance on Fox News. He declared the tariff programme will not only be 'fully reconstituted, but it will be expanded' through other means. The message: legal mechanisms may change but the administration's goal to reshape global trade relationships remains the same.

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