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The February 20, 2026, judgment of the U.S. Supreme Court has not only dismantled President Donald Trump’s sweeping “reciprocal tariffs” but has also fundamentally altered the logic of several U.S. trade arrangements—including India’s still-evolving bilateral framework with Washington.

For New Delhi, the most consequential part of the episode may not be the temporary 10 per cent global tariff that followed, but a single sentence buried in the February 6 US–India Joint Statement: the escape clause.

That clause now offers India both legal cover and strategic leverage to pause, recalibrate, or even walk away from a deal whose promised benefits have been overtaken by events.

A ruling that rewrites the trade playbook

In a 6–3 decision authored by Chief Justice John Roberts, the Supreme Court held that the 1977 International Emergency Economic Powers Act (IEEPA) does not authorize a U.S. president to impose broad, economy-wide tariffs during peacetime without explicit congressional approval. The ruling shuts the door on what had become the administration’s fastest and most powerful tariff weapon.

As SBI Research notes in its February 21 assessment, the judgment leans heavily on constitutional “originalism,” reiterating that the power to levy duties lies with Congress alone. The Court explicitly rejected the idea that a statute designed to manage hostile foreign assets and financial transactions could be repurposed to tax imports globally.

Yet the verdict also reveals a delicate balance. While blocking IEEPA, the Court acknowledged—especially through dissenting opinions—that other, narrower statutory routes remain open. This nuance explains the administration’s immediate pivot.

The 10% tariff: a legally fragile stopgap

Within hours of the ruling, President Trump announced a temporary 10% tariff on most imports under Section 122 of the Trade Act of 1974, effective February 24 for up to 150 days. This marks the first-ever use of Section 122 in its five-decade history.

SBI Research describes this as a “back-up plan,” stressing that Section 122 was crafted for an era of fixed exchange rates and acute balance-of-payments crises—conditions the United States does not face today. Any tariffs imposed under this provision automatically lapse after 150 days unless Congress approves an extension, making the measure inherently short-lived and legally vulnerable.

The implication is clear: the U.S. administration has preserved short-term leverage but at the cost of predictability. For trading partners, including India, the tariff environment has become less punitive but more uncertain.

Why the escape clause now matters

Against this backdrop, the February 6, 2026, US–India Joint Statement takes on new significance. Under that interim framework, India had offered substantial concessions—lower MFN tariffs on select goods, regulatory easing, closer policy alignment with U.S. priorities, and signals of increased U.S. purchases. In return, Washington proposed reducing India’s “reciprocal tariff” to 18 per cent.

That tariff no longer exists.

The Supreme Court ruling has invalidated the legal basis for country-specific reciprocal tariffs. From February 24 onward, India—like most U.S. trading partners—faces a uniform 10 per cent duty layered over MFN rates. This renders the negotiated 18 per cent rate redundant and sharply diminishes the value of India’s concessions.

Crucially, the joint statement anticipated such a scenario. It states that “in the event of any changes to the agreed upon tariffs of either country, the other country may modify its commitments.” With U.S. tariffs altered not by negotiation but by judicial fiat, India is fully entitled to invoke this clause.

From a GTRI perspective, this is not a technical footnote—it is the core safeguard that prevents India from being locked into a one-sided arrangement. Continuing negotiations on the original terms would amount to conceding more for less.

Commerce Ministry: cautious, but deliberately so

The Ministry of Commerce & Industry has adopted a measured public posture. In its February 21 press statement, the ministry said it had “noted the US Supreme Court judgement” and the subsequent announcements by President Trump, adding that India is “studying all these developments for their implications.”

This restraint should not be mistaken for passivity. In trade diplomacy, silence often signals reassessment. Officials are acutely aware that roughly 55 per cent of India’s exports to the U.S. will now revert to standard MFN tariffs alone, while key sectors—such as smartphones, petroleum products and pharmaceuticals—remain exempt from additional duties. In contrast, steel, aluminum and certain auto components continue to face Section 232 tariffs, which were untouched by the ruling.

The immediate economic pressure on India has eased. That gives New Delhi time—and bargaining space.

GTRI and expert assessments: rethink, don’t rush

At the Global Trade Research Initiative, we see the ruling as a clear signal to reassess the entire premise of the US–India trade talks. India had negotiated under the shadow of punitive tariffs that have now been struck down. With those tariffs gone, the incentive structure has changed.

Tax experts echo this view. Manoj Mishra of Grant Thornton Bharat has pointed out that the agreed 18 per cent reciprocal tariff “no longer remains relevant” and that any future attempt to impose such duties would require congressional approval—raising the political and legal bar significantly.

SBI Research goes further, warning that the Court’s decision could “upend” multiple trade deals negotiated under the now-invalid IEEPA framework. The report highlights a looming “melee” between sovereign trade commitments and the rights of private firms that successfully challenged the tariffs and may now seek refunds. This legal overhang adds yet another layer of uncertainty to U.S. trade policy.

A broader South Asian lens

While India is most directly affected, the implications extend across South Asia. Bangladesh’s apparel sector, Pakistan’s textiles, and Sri Lanka’s niche exports all benefited—at least on paper—from the removal of harsher country-specific duties. At the same time, the uniform 10 per cent tariff and its temporary nature complicate pricing, contracts, and supply-chain planning.

For the region, the episode reinforces a hard lesson: trade arrangements built on executive discretion in Washington can unravel overnight. Durable market access requires statutory backing, not just political deals.

The road ahead: pause, reset, renegotiate

The Supreme Court has made sweeping U.S. tariffs harder to impose, not impossible. Sections 232 and 301 remain available, but they are slower, narrower, and subject to investigation and challenge. That shift alone changes the negotiating balance.

For India, the prudent course is clear:

• Invoke the escape clause to pause or recalibrate commitments.
• Avoid rushing into finalizing a deal whose core benefit has evaporated.
• Seek fresh terms that reflect the new, lower-tariff baseline and the restored role of the U.S. Congress.

In trade diplomacy, timing is leverage. The Court has handed India time—and options. Whether New Delhi uses the escape clause to walk away, wait, or renegotiate from a stronger position will shape not just the US–India trade relationship, but South Asia’s broader engagement with an increasingly unpredictable U.S. trade regime.