Most of Trump’s tariffs got turfed out: Does that change the case for a trade deal with the US?

Did New Delhi act in haste on this bilateral pact, given that his IEEPA barriers were still under legal scrutiny? Will last week’s ruling end a wild reign of tariffs fired from the hip? The answer to all these questions is ‘no.’

Nor does the 6-3 majority decision change India’s twin needs to forge closer economic ties with the US and expose India’s economy to greater foreign competition—except in hard-up fields devoid of market dynamism, like large parts of farming. To meet our global ambitions, we need a sharper competitive edge anyway.

What’s likely to change is Trump’s toolkit of trade barriers. The top US court has struck down his reciprocal tariffs levied against most trade partners, but he has laws other than the IEEPA at his disposal. He has already invoked Section 122 of the US Trade Act of 1974 for a fresh 15% levy.

These can stay in place for 150 days, after which they will need the approval of Congress. Section 232 of the 1962 Trade Expansion Act lets him retain his metal and auto tariffs in purported defence of US national security.

If Trump obtains probe reports of other countries treating America unfairly, he could resort to Section 301 of the US Trade Act; Section 338 of the Tariff Act of 1930 may come in handy too, should a myopic view of trade prevail, one that casts surplus-running partners as villains out to rip America off.

Whatever tools Trump picks, the world can expect further bouts of trade instability. Penal tariffs based on probes that prove hollow in court, for example, could also get turfed out at some point. For now, what’s good for America’s institutional backbone is bad for the US economy’s momentum of investment and growth.

If it must refund reciprocal tariff charges, its fiscal deficit would widen and put upward pressure on its bond yields. As for America’s trade gap, its 2025 figure has turned out almost the same as 2024’s, which points to inelastic import demand.

If Trump’s actual aim is just to reshuffle ports of origin, then his web of bilateral deals could yet play a role.

Trade is not a zero-sum game. In theory, barrier reduction aids all sides through efficiency in resource allocation across borders. In practice, tilts cause friction and talks involve give-and-take.

India has struck deals with the EU, European Free Trade Association, Oman and New Zealand after Trump began his tariff onslaught last April, before moving to seal one with the US. By principle, if we let any items enter duty-free, we must let American stuff enter on equal terms.

The common policy theme here is trade openness. It speaks of export optimism on the logic that lowering import barriers will cheapen inputs for many factories and pressure various domestic sectors to get into better competitive shape.

The goal should be to lower our industrial cost base; for this, we do not need tariff-rate symmetry with every partner. A trade deal with the US remains a worthy pursuit even if it looks lopsided—to reap the benefits of trade liberalization. To open up is to bet on India’s future.

As ‘China plus one’ plans get drafted amid all this trade flux, we must globalize our economy for its own sake. Capital inflows will need to support this project. This reality doesn’t change either.