Tariff deemed unlawful by US court judgement deemed irrelevant to India, asserts authority figure in trade law

The US Court of Appeals for the Federal Circuit has ruled that a 50% punitive tariff imposed by President Donald Trump was imposed illegally under emergency powers. This decision, a 7-4 verdict, upholds an earlier decision by the Court of International Trade made in May.

The court's ruling throws uncertainty over trillions of dollars of trade agreements negotiated during Trump's presidency, particularly those involving Mexico, Canada, and China. The tariffs were justified on grounds of trade deficits and the fentanyl crisis.

Family-run firms such as Learning Resources Inc., which previously won a separate case against the IEEPA tariffs, welcomed the ruling as vindication of their long-standing arguments. Democratic-led states and small businesses, part of the coalition challenging Trump's policy, celebrated the verdict as a step towards correcting an unlawful abuse of presidential power.

However, the high tariffs on Indian goods remain in place, despite the court ruling. A 50% US tariff on imports from India is expected to significantly harm India's economy. The tariffs could limit manufacturing sector growth, reduce exports to the US (currently a major market worth $87 billion), and potentially undo recent investment gains.

Moody's warns of a growth slowdown, while the analysis house CLSA estimates a GDP growth reduction of around 0.6 percentage points overall, with affected sectors possibly redirecting exports to other markets. Despite some exemptions (pharmaceuticals, refined fuels), the tariffs exacerbate trade tensions and have contributed to negative effects on Indian capital markets and the rupee's performance.

The ruling against Trump's tariffs could potentially trigger demands for refunds amounting to hundreds of billions of dollars. Trump himself expressed concern, stating that eliminating the tariffs would be "a total disaster for the Country."

Trading partners are reportedly "dazed and confused" about the court's decision, with some nations having signed framework deals and others still negotiating terms under the shadow of tariffs that may ultimately be overturned. Japan, Korea, and the European Union may reconsider the pace of their ongoing talks with the US until greater legal clarity emerges.

India is not directly covered by the ruling, but trade watchers suggest that New Delhi will closely monitor developments, as the setback for Washington could strengthen its negotiating position. The tariff imposed by Trump on India earlier this month for continuous buying of Russian oil remains in place while litigation continues.

The Trump administration has argued that striking down the tariffs could undermine US foreign policy, with Treasury Secretary Scott Bessent warning of "dangerous diplomatic embarrassment" and weakening of trade talks. Mollie Sitkowski, a trade lawyer, clarified that the judgment does not directly apply to India or Brazil, as they were subjected to tariffs under separate provisions of the emergency law.

New York Attorney General Letitia James, part of the coalition, described the tariffs as a "tax on Americans," contributing to inflation and job losses. The removal of the de minimis exemption for imports valued under $800 remains unaffected by Friday's decision.

In a surprising turn of events, it was reported that Trump asked Prime Minister Modi for Nobel Peace Prize backing, and his refusal led to the imposition of 50% tariffs on Indian goods. This revelation adds another layer of complexity to the ongoing trade disputes.

Tariff deemed unlawful by US court judgement deemed irrelevant to India, asserts authority figure in trade law