India puts rider to signing US trade deal after Supreme Court sinks key tariffs

“The US deal was to be signed in March. When we had said this, the Supreme Court judgment on IEEPA tariffs had not come. Now with the Supreme Court order, the [reciprocal tariffs] per se do not exist. Now, we have [US] tariffs under the balance of payments (BoP) under Section 122, which have been in place for five months. So any deal that we sign has to be around a tariff structure or comparative advantage that India gets in the US market. The US is working on trying to recreate a tariff architecture. When they can create the pathway, that juncture will be right to sign a deal,” the official said.

The official clarified that there is no standoff between India and the US on the trade deal, adding that trade partners who have declared the US deal null and void would be those who have “signed” the agreement and not partners with whom the US have “agreed to” a framework agreement.

“There are two kinds of countries. One set of countries is those which have announced the agreement and signed the legal agreement, and one set that has not signed the legal agreement. So countries which have signed the legal agreement, like Malaysia, will need to recalibrate the deal because the agreement is based on the IPEEPA tariffs. But from India’s perspective, we are in the other bucket, where we have announced the deal like Europe, but have not signed the legal agreement. So we have to wait to see how the global tariff architecture pans out,” the official said.

Section 301 tariffs

The official said that the trade deal, whenever signed, will take care of Section 301 tariffs and that India and the US are negotiating several issues, including non-tariff barriers and Section 232 tariffs.

The US last week launched two Section 301 investigations on several countries inclduing India. One cites structural excess capacity and overproduction in certain manufacturing sectors, and the second cites failure to prohibit imports of goods produced using ‘forced’ labour. The fast-tracked nature of the investigation could mean that new US tariffs would be in place from May.

Targeting India over “structural excess capacity and production”, USTR said, in 2025, India had a bilateral trade surplus with the United States of $58 billion, and that India’s global goods trade surplus sectors include textiles, health, construction goods, and automotive goods.

“For example, evidence suggests the solar module sector is plagued by excess capacity, including that India’s current module manufacturing is nearly triple the annual domestic demand. India also has created significant excess capacity in petrochemicals, steel, and other industries,” USTR said.

10% tariffs on India

India and the US announced a trade deal on February 2, and a joint statement for the same was released on February 7. The 25% additional ad-valorem tariffs imposed by the US on certain Indian exports, citing India’s imports of Russian oil, were removed on February 7.

After the US Supreme Court judgement on February 20, invalidating reciprocal tariffs, the reciprocal tariffs are no longer in force. The US government has issued Executive Orders imposing 10% tariffs pursuant to section 122 of the Trade Act of 1974 on certain products from all countries.

Even in the face of rapidly shifting US tariffs that were used to coerce countries into signing trade agreements, India has signalled that it would stick to the pact that had been finalised before the US IEEPA court order. This is conditional to Washington ensuring a comparative tariff advantage for Indian products.