As US court declares Trump's tariffs illegal, experts urge India to reassess trade talks

The court ruled on 28 May (29 May in India) that Trump’s 10% baseline tariffs and country-specific duties—such as the 26% levy on Indian goods—were not justified under the International Emergency Economic Powers Act since trade deficits do not qualify as an “unusual and extraordinary threat" under the law.

Since Trump announced the reciprocal tariffs on 2 April, the US has been pressing other nations into making unilateral concessions to avoid its steep tariffs. 

Indian negotiators are preparing to open up sensitive sectors, including automobiles and agriculture, and allow greater foreign access to government procurement and digital infrastructure as part of a bilateral trade agreement with the US. Experts now say India should hit pause.

Also read | India puts big pharma concessions on table as US trade deal nears finish line

“The court has struck down the very basis of Trump’s tariffs. India must not enter into a one-sided deal based on illegal pressure tactics," said Ajay Srivastava, co-founder of the Global Trade Research Initiative (GTRI), a trade research think tank. 

“We should reassess our strategy, ensure reciprocity, and not rush into finalising an FTA (free trade agreement) that disproportionately benefits the U.S," he said.

Srivastava added that India appears to be offering large concessions without receiving a comparable commitment from the US. “This is not how balanced trade agreements are made, especially when the legal footing of the pressure tactic is now gone."

The Trump administration, which has postponed the imposition of the country-specific tariffs until 8 July, is using the interim period to fast-track bilateral deals. The UK signed one on 8 May, slashing duties on more than 2,500 US products, increasing Boeing purchases, and removing tariffs on US ethanol, while receiving only limited tariff reductions in return.

But on 12 May, the US signed a deal with China, slashing its proposed reciprocal tariffs on a wide range of Chinese goods from 145% to 30%. Though the deal is for a 90-day period, it helped global markets recover.

“The ruling itself, while a great one in law, may not be an effective check on the tariffs or threat of enhanced tariffs, given the track record of the Trump administration," said R.V. Anuradha, partner, Clarus Law Associates. “For India, the negotiation of any trade agreement has to keep as its central focus our own national interest, and not be a response to threats of tariffs."

The US-China temporary truce, and the US's threat to impose tariffs on Apple should it manufacture in India, has exposed the uncertainties of any perceived geopolitical advantages, Anuradha added.

Also read | India seeks wider US market access for fruit, vegetables, easy sanitary regulations

An uncertain situation

Trade experts pointed out that Trump’s administration can still appeal against the US court’s ruling.

On whether India could gain an edge in its trade talks with the US as a result of the court’s ruling, Abhijit Das, an expert on international trade and former head of the Centre for WTO Studies, said that would depend on “whether Trump is compelled to withdraw the reciprocal tariffs or manages to buy some breathing space by appealing the court’s decision".

“In this uncertain situation, India needs to be very cautious in granting concessions to the US," Das said.

Also read | Washington pushes for a fast-track route for its meat and seafood under India-US bilateral trade agreement

“The current judgement, which invalidates Trump’s tariffs and negotiations, is based on the fact that they are being carried out under emergency powers. The move has been welcomed by American markets as positive for the American economy," said Rahul Ahluwalia, founder and director of Foundation for Economic Development, a policy advocacy organisation.

“For India, as long as we are able to maintain a better tariff standing vis-a-vis China, we will benefit. However, this judgement is open to appeal and will be appealed by the Trump administration. So we need to wait and watch to see how it shakes out," said Ahluwalia.

Srivastava of GTRI added that any agreement shaped by coercive leverage should be put on hold. “India has every reason to demand fairness and legal clarity in trade negotiations."

The commerce ministry didn’t immediately reply to Mint’s queries on India’s plans following the latest development.

Union commerce minister Piyush Goyal on Thursday declined to comment on the recent US court ruling that termed certain American tariffs as illegal, saying, “India doesn’t comment on internal matters of other countries." Addressing the CII Annual Business Summit, Goyal reiterated that India is seeking free trade agreements (FTAs) with developed countries to benefit its consumers, industries, and farmers.

He noted that Prime Minister Narendra Modi and former US President Donald Trump had agreed to pursue a broad-based, mutually beneficial bilateral trade agreement during Trump’s visit to India. Goyal added that such trade deals are the result of detailed and intensive discussions between governments and are not meant to be debated publicly in the media.

India-US trade deal on fast-track

India is close to finalising a much-awaited trade deal with the US, likely before 8 July, when Trump’s 90-day pause on his reciprocal tariffs is set to expire, as Mint reported exclusively on 16 May.

A deal before the 8 July cutoff would likely help India avoid the US’s punitive tariffs, reset the bilateral trade relationship on a more stable footing, and provide greater clarity to industries and markets awaiting direction.

India’s bilateral trade with the US climbed significantly in the just-ended financial year, to $131.84 billion in FY25 from $119.72 billion in FY24. This growth was driven by a sharp increase in Indian exports, which rose 11.6% to $86.51 billion from $77.52 billion over that period, while imports from the US grew at a slower pace of 7.42%, to $45.33 billion from $42.20 billion.

As a result, India’s trade surplus with the US widened by 16.6% to $41.18 billion in FY25, compared with $35.32 billion in the previous year.