US-India Trade Talks Stalled Following SCOTUS Ruling on Trump Tariff Powers

The sudden postponement of high-level trade negotiations between India and the United States marks a significant fracture in the bilateral economic relationship, triggered by a landmark legal challenge to executive authority in Washington. The three-day summit, originally slated to begin on February 23 in Washington DC, was intended to finalize the legal text of a long-awaited interim trade pact. However, the jolt delivered by the U.S. Supreme Court—ruling that the power to impose tariffs resides solely with the U.S. Congress rather than the President—has thrown the legal foundation of the proposed deal into question.

For the Modi administration, the delay represents a tactical setback in its efforts to secure preferential market access. Commerce Minister Piyush Goyal had previously signaled that a deal could be signed as early as March, with implementation following in April. The interim agreement was seen as a crucial Phase One step toward a more comprehensive free trade agreement, aimed at resolving long-standing disputes over agricultural exports, medical devices, and digital trade. The sudden legal ambiguity surrounding President Donald Trump’s ability to offer tariff concessions or threats has forced both sides to retreat and evaluate the shifting regulatory landscape.

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In a defiant response to the ruling, President Trump announced a 10% emergency tariff on all imports, including those from India, effective February 24 for a 150-day period.

The U.S. Supreme Court’s decision has effectively stripped the executive branch of one of its most potent economic levers. By reaffirming that Article I of the Constitution grants tariff-setting authority to Congress, the court has introduced a new layer of complexity to international negotiations. In a defiant response to the ruling, President Trump announced a 10% emergency tariff on all imports, including those from India, effective February 24 for a 150-day period. This was quickly escalated to 15% just a day later. This aggressive move appears designed to force a legislative solution or maintain leverage while the administration navigates the court's restrictions, but it has simultaneously poisoned the well for immediate diplomatic breakthroughs.

Domestically, the Indian government faces mounting pressure from the opposition. The Indian National Congress party has characterized the proposed interim deal as a surrender of national interests, urging the government to put the negotiations into cold storage. The opposition argues that the SCOTUS ruling provides India with a strategic opportunity to renegotiate from a position of strength, particularly as the U.S. executive branch's unilateral powers are being curtailed. This domestic friction complicates the Modi government's path, as any perceived concessions to a legally hamstrung Trump administration could be politically costly.

From a market perspective, the immediate impact is one of heightened volatility and uncertainty. Indian exporters, particularly in the textile, steel, and pharmaceutical sectors, now face a 15% tariff wall for at least the next five months. This 150-day window creates a period of extreme unpredictability for supply chains and pricing strategies. Investors will be closely watching for signs of a mutually convenient date for the rescheduled talks, but the reality is that the deal's architecture may need a total overhaul to include U.S. Congressional approval—a process that is historically slow and fraught with partisan gridlock.

Looking ahead, the trajectory of India-US trade will depend on whether the Trump administration can find a legislative workaround or if the U.S. Congress chooses to assert its newly reaffirmed authority to shape trade policy. For India, the challenge lies in balancing the desire for a quick deal with the necessity of ensuring that any agreement is legally durable under the new U.S. constitutional interpretation. Until the legal dust settles in Washington, the Phase One deal remains in a state of suspended animation, leaving billions of dollars in bilateral trade hanging in the balance.