The United States Court of International Trade on May 7 delivered another setback to Donald Trump’s tariff strategy, striking down the 10% global duties imposed under Section 122 of the Trade Act of 1974. The 10% tariffs were imposed by the Trump administration after the US Supreme Court blocked the “Liberation Day tariffs”, which had imposed duties of up to 50% on countries. This ruling comes less than 50 days after the tariffs were introduced on February 20. With both the reciprocal tariffs and the Section 122 tariffs now struck down by courts, the United States is largely moving back to its earlier tariff system based on Most-Favoured-Nation (MFN) rates under the WTO framework. Section 122 allows the US president to impose tariffs of up to 15% for up to 150 days without needing approval from Congress. It is meant to deal with serious balance-of-payments problems.In this case, the tariffs were introduced shortly after the Supreme Court of the United States struck down reciprocal tariffs. The court said the administration went beyond what Section 122 allows under the Trade Act of 1974. It called the tariffs “invalid” and “unauthorized by law”, saying the law is meant for balance-of-payments emergencies, not for broad tariffs aimed at reducing trade deficits.
Who is affected by the ruling?
For now, the ruling applies only to the parties in the case, the state of Washington, spice importer Burlap & Barrel, and toy maker Basic Fun!. Other importers are still covered by the tariffs while the government appeals. The court did not stop the tariffs nationwide at this stage and limited relief only to the plaintiffs.Now, the Trump administration is expected to appeal before the United States Court of Appeals for the Federal Circuit.The plaintiffs may also push for the ruling to apply nationwide. The case could eventually reach the Supreme Court again, which would keep the issue open for longer.With the ruling struck down, the Global Trade Research Initiative (GTRI) has advised India to rethink its Free Trade Agreement talks with the United States.
What does it mean for India?
Think tank GTRI suggests that India should reassess its Free Trade Agreement talks with the United States. The repeated court strikes against tariff measures raise doubts about how stable US trade policy is. “India should wait until the United States develops a more stable and legally reliable trade system before concluding the Bilateral Trade Agreement. The continuing uncertainty around US tariff policy, with major Trump-era tariffs repeatedly struck down by courts, makes any long-term trade commitments by India difficult to justify,” the report stated.At present, the United States is still maintaining its MFN tariffs while expecting partners to reduce or remove their own duties. This raises concerns that future trade deals could become uneven, with partners giving concessions without getting equal tariff benefits in return. “At present, the US is also not prepared to reduce its standard Most-Favoured-Nation (MFN) tariffs, while expecting India to lower or eliminate it MFN duties across most sectors. Under such conditions, any trade deal risks becoming one-sided, with India offering permanent market access concessions without receiving any meaningful tariff benefits in return.”Meanwhile, the uncertainty is already affecting trade negotiations. Malaysia has walked away from its trade deal with the United States, and other countries are also rethinking agreements with Washington.
