Why in News?

• The U.S. Supreme Court, in a 6–3 ruling, struck down President Donald Trump’s sweeping tariffs imposed under the International Emergency Economic Powers Act (IEEPA), 1977.
• The judgment marks a critical moment in the debate over separation of powers, executive overreach, and the future of U.S. trade policy.
• The ruling has significant implications for the global economy, including countries like India, which have been directly affected by U.S. tariff measures. 

What’s in Today’s Article?

• Constitutional Issue - Executive vs Legislative Authority
• Trump’s Tariff Strategy - Economic and Foreign Policy Tool
• Legal Challenges and Federal Pushback
• Alternative Tariff Mechanisms - Sections 122, 301, and 232
• Broader Implications
• Challenges and Way Forward
• Conclusion

Constitutional Issue - Executive vs Legislative Authority:

• Core constitutional principle:
  • The U.S. Constitution grants Congress the authority to levy taxes and tariffs, not the President.
  • Trump invoked IEEPA, a law meant for national emergencies, to impose tariffs without Congressional approval.
  • The Court upheld a lower court ruling stating that this action exceeded presidential authority.
• Nature of IEEPA:
  • Enacted in 1977 under President Jimmy Carter, it was historically used to freeze assets, impose sanctions. It does not explicitly mention tariffs.
  • Trump became the first President to use IEEPA to impose tariffs.

Trump’s Tariff Strategy - Economic and Foreign Policy Tool:

• Trade war and economic leverage:
  • Trump used tariffs as a revenue-generating instrument (estimated $300 billion annually if fully retained).
  • It is used as a foreign policy tool, a means to renegotiate trade deals, and a pressure mechanism against China, Canada, Mexico, India, and Brazil.
• “Liberation Day” tariffs (April 2, 2025):
  • Announced “reciprocal tariffs” on most trading partners.
  • Justified under a “national emergency” related to trade deficits.
  • Also invoked IEEPA citing fentanyl trafficking and migration concerns.
• Economic impact:
  • Over $175 billion collected under IEEPA-based tariffs (Penn-Wharton estimate).
  • $195 billion net customs duty receipts in FY 2025 (record high).
  • Refund liability likely after the Supreme Court ruling.
  • Created global market uncertainty and financial volatility.

Legal Challenges and Federal Pushback:

• Three lawsuits challenged the tariffs -
  • Small importing businesses.
  • 12 U.S. states (including Arizona, Colorado, New York).
  • Federal rulings against the administration.
• The Court reaffirmed national emergency powers cannot become a substitute for legislative trade authority.

Alternative Tariff Mechanisms - Sections 122, 301, and 232:

• After the ruling, Trump indicated he would explore other statutory options. For example,
• Section 122 (Trade Act, 1974):
  • It allows up to 15% tariff to address serious balance-of-payments deficits. Never used before, it is valid for 150 days, unless extended by Congress.
  • Trump signaled a 10% global tariff under this provision.
• Section 301 (Trade Act, 1974):
  • It is a targeted and investigation-based (not sweeping) provision, triggered when the U.S. Trade Representative (USTR) finds “unfair trade practices”.
  • Previously used against India over the Digital Services Tax (2020). Later resolved under OECD global minimum tax framework.
• Section 232 (Trade Expansion Act, 1962):
  • It allows tariffs on national security grounds, and it is sector-specific (steel, aluminium, automobiles, etc.).
  • India currently faces 232 tariffs on steel, aluminium, automobiles, and copper derivatives.
  • Some relief possible under the recent U.S.-India trade understanding, including:
    • Tariff removal on certain aircraft parts.
    • Preferential TRQ (Tariff Rate Quota) for automotive parts.
    • Negotiations in generic pharmaceuticals.

Broader Implications:

• For the U.S. political system: Reassertion of judicial review. Curtailment of expansive executive authority. Reinforcement of Congressional primacy in taxation.
• For Global trade: Potential rollback or restructuring of tariff regimes. Increased uncertainty in the short term. Possible shift toward more rules-based trade measures. Affects WTO dynamics and global trade governance.
• For India: Relief potential in select sectors (aircraft parts, auto components). Continued exposure to 232 tariffs. Trade diplomacy becomes critical. Strategic balancing amid U.S.–China competition.

Challenges and Way Forward:

• Conflict: Between Executive-Legislative branches over trade authority. Strengthening Congressional oversight in trade policy.
• Risk: Of renewed protectionism under alternative provisions. Greater adherence to multilateral trade norms (WTO-consistent measures). Targeted, transparent use of national security provisions.
• Instability: Of the global supply chain. Diplomatic engagement to prevent tariff escalation. For India, proactive trade negotiations and diversification of export markets is the way ahead.

Conclusion:

• The Supreme Court’s ruling marks a pivotal constitutional correction in the United States, reinforcing the doctrine that emergency powers cannot be stretched into instruments of broad economic policy.
• For the global economy — and countries like India — the decision may reduce tariff unpredictability, but the era of strategic trade weaponisation is far from over.
• The episode underscores a larger global trend: trade policy is increasingly intertwined with national security, domestic politics, and geopolitical rivalry.