The US Supreme Court decision to strike down President Donald Trump's emergency tariffs gives India more scope in negotiations over a trade deal, people familiar with the matter said.
New Delhi is not considering backing away from a bilateral trade agreement with the US struck earlier this month, the people said, asking not to be identified because the discussions are private. Both sides agreed in February to a deal that would lower US tariffs on Indian goods to 18% from 50%, with New Delhi pledging to buy $500 billion of American goods over five years as well.
A spokesperson for the India's Ministry of Commerce and Industry didn't respond to an email seeking comments.
The US Supreme Court scrapped President Donald Trump's use of emergency powers to impose tariffs, a ruling that upended his trade measures worldwide. New Delhi is treading carefully after the ruling, balancing its trade interests while seeking to avoid friction with Trump's administration, which has urged partner nations to honor deals signed.
India should “keep engaging with the US to find out what is on their mind, what are the actions being contemplated by them and to enter into a dialogue with them,” Jayant Dasgupta, former Indian ambassador to the World Trade Organization, told Bloomberg Television's Haslinda Amin. “We are not clear which way it would proceed.”
A team of Indian negotiators postponed a scheduled visit to Washington to finalize the interim deal after the verdict late last week. The two countries were scheduled to sign the first phase of the deal next month and continue negotiating a comprehensive bilateral trade agreement.
India has tapered purchases of Russian oil in recent months but maintained it reserves the right to buy crude based on its energy needs and market conditions, a position officials reiterated. New Delhi faced punitive tariffs for buying Russian oil, which were later scrapped as part of the trade agreement.
“India is also likely to reassess its US trade deal, especially as the threat of punitive tariffs with respect to Russian oil purchases is gone – albeit India may choose to continue tapering purchases to maintain relations with Trump,” said Madhavi Arora, economist with Emkay Global Financial Services Ltd., adding that India could seek more favorable terms in talks, with less pressure now to make large concessions.
Tariff Winners
China, India and Brazil are among those now seeing lower tariff rates for shipments to the US after the court ruled that Trump's use of the International Emergency Economic Powers Act to impose duties was illegal. While Trump subsequently announced plans for a 15% global rate, Bloomberg Economics calculated that would mean an average effective tariff rate of around 12% — the lowest since his “Liberation Day” tariffs were released in April.
New Delhi is likely to insist on including provisions that safeguard against similar court decisions in the future, people familiar with the matter said. The ruling has significantly diminished Trump's leverage, one person said.
Finance Minister Nirmala Sitharaman said it was too early to comment, adding the trade ministry was reviewing the situation.
Farmer groups such as the Samyukt Kisan Morcha, which had been protesting against the deal, will be hold a meeting Tuesday to discuss their next steps in the wake of the court ruling.
Despite the development, uncertainty on tariffs remains, Gaura Sen Gupta, chief economist at IDFC First Bank Ltd, said. While going forward the US's ability to use tariffs will be restricted, “in the base case we expect the trade deal with the US to go ahead.” she said. “From a certainty perspective it's better to have a deal with the US , as they will find a way to impose additional tariffs under other acts such as unfair trade practices.”
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