In a ruling that was not entirely unexpected, the US Supreme Court (SC) has struck down the Trump administration’s “reciprocal tariffs,” holding that the sweeping duties imposed under the International Emergency Economic Powers Act (IEEPA) were unjustified. Arguing before the Court, former Acting Solicitor General Neal Katyal contended that the United States could not plausibly claim a national security emergency against every country simultaneously. Trade deficits have existed for decades, raising the question of why they would suddenly constitute a security threat.The implication is clear: The additional 25 per cent across-the-board “reciprocal” tariffs now stand withdrawn.AdvertisementThe Budget Lab at Yale University estimated that, prior to the ruling, the average effective US tariff stood at around 16.9 per cent. This would have dropped to about 9.1 per cent after the judgment. However, in a show of defiance, Trump invoked Section 122 of the Trade Act of 1974 to impose a 10 per cent tariff, and then reportedly raised it to 15 per cent, on all imports, valid for 150 days. The effective tariff, therefore, sits at approximately 13.7 per cent. Until further clarity emerges, Canada and Mexico remain the lowest-tariff zones. Notably, tariffs imposed under the IEEPA on steel, automobiles, and aluminium remain in place.Three issues arise. Will Trump use other legal instruments to restore his broader tariff regime? How will refunds be addressed? And what does this mean for countries such as India?One point is clear: The Supreme Court ruling does not deny the President authority to impose tariffs. Rather, it holds that emergency powers under the IEEPA cannot be used as a revenue-raising device. For broader authority, the President must seek explicit Congressional sanction. As Chief Justice Roberts observed, for “the President to … unilaterally impose tariffs of unlimited amount [and] duration … he must identify clear congressional authority.” In effect, the Court has restored Congress’s primary tariff-imposing authority, leaving the President with limited tools such as Section 122 or country-specific action under the Omnibus Trade and Competitiveness Act (“Super 301”), which requires USTR (US Trade Representative) investigations over time.AdvertisementThe most immediate challenge for the administration is refunds. In proceedings before the Trade Court, Trump’s lawyers reportedly agreed that tariff revenues would be refunded if the measures were overturned, according to The New York Times. The potential cost could exceed $175 billion.Part of this revenue has already been disbursed, including subsidies to farmers. Trump has also promised a $2,000 handout to middle- and low-income Americans and outlined plans for a $500 billion “dream military budget.” Small businesses are expected to seek legal refunds of tariffs paid. Trump, however, maintains that courts have issued no definitive ruling on refunds and suggests the matter could remain in litigation for years. He has indicated no intention to voluntarily return customs duties already collected.The ruling also casts doubt on trade arrangements negotiated under the now-invalid tariff framework. Unless ratified by Congress, such agreements rest on uncertain legal ground. None were submitted to the World Trade Organisation. Consider the agreement with Vietnam signed in August 2025. Vietnamese goods faced average duties of around 20 per cent, with some exceptions, while US agricultural and industrial exports received zero-duty access. Following the Court’s ruling, the effective average duty faced by Vietnam would be about 13.7 per cent, rendering the bilateral arrangement internally inconsistent.What lies ahead? If Trump wishes to restore broader tariff authority, he must return to Congress. His principal argument will likely centre on countering Chinese assertiveness in technological competition and addressing China’s control over rare earths. This framing reinforces the emerging “new Cold War,” defined more by economic and technological rivalry than military confrontation — language a Republican-controlled Congress would likely find persuasive.For India, the ruling raises significant economic and strategic considerations. It makes little sense to proceed with an arrangement offering access at 18 per cent while promising zero duties on many Indian industrial imports. Under the Court’s decision, the administration can currently offer only a temporary 10 per cent (now reportedly 15 per cent) across-the-board tariff, valid for 150 days unless approved by Congress. The much-discussed “trade deal” was, in any case, largely a statement of intent.you may likeIt would be more prudent for India to negotiate targeted concessions for labour-intensive exports while ensuring alignment with the forthcoming India-EU Free Trade Agreement. As I noted earlier in The Indian Express (‘Why is India pursuing FTAs? It’s not just economics’, IE, December 15), trade agreements also serve a diplomatic function, particularly in the context of the emerging economic Cold War. The ruling may provide additional leverage for India to seek improved terms.Amid the uncertainty, one positive outcome may be a revival of trade multilateralism. If unilateral tariff measures are constrained by judicial oversight and congressional authority, renewed emphasis on rules-based global trade frameworks could follow. This may be the most optimistic global scenario the SC ruling offers, even as it promises immediate turbulence in trade circles.A revival of the multilateral framework under the WTO may yet lie ahead.The writer is Visiting Professor, Shiv Nadar University