Introduction

Throughout economic history, trade wars and tariff conflicts have periodically disrupted global commerce. During his presidency from 2017 to 2021, Donald Trump made protectionist tariffs a central aspect of U.S. trade policy, targeting adversaries like China as well as allies in Europe, North America, and beyond. However, on August 29, 2025, the U.S. Court of Appeals for the Federal Circuit (CAFC) ruled by a 7–4 majority that Trump had unlawfully invoked the International Emergency Economic Powers Act (IEEPA), 1977 to impose sweeping tariffs on imports from nearly 90 countries.

Background: Trump’s Tariff Agenda

·       Trump’s “America First” policy redefined U.S. trade strategy. Sidestepping multilateral bodies such as the World Trade Organization (WTO), his administration unilaterally imposed tariffs on steel, aluminium, and a broad range of imports — often on grounds of national security. While his stated goals included shrinking trade deficits and revitalising American manufacturing, the economic rationale and legal justifications remained controversial.

·       Under IEEPA, the U.S. President is granted powers to regulate commerce in response to unusual foreign threats. Originally designed for emergencies involving terrorism or hostile nations, Trump controversially interpreted economic threats — such as trade imbalances and intellectual property theft — as valid grounds for national emergency declarations, thereby applying tariffs far beyond the act’s intended scope.

Economic Consequences

·       For the U.S. economy, Trump’s tariffs led to increased costs for consumers and businesses. Industries reliant on imported inputs — including automotive and electronics sectors — faced rising production expenses. Studies from institutions like the Peterson Institute for International Economics showed that American consumers and firms bore over 90% of the tariff burden, resulting in higher prices and reduced global competitiveness. The court ruling adds another layer of uncertainty: if the tariffs are ultimately struck down, it could lead to financial disruptions, including refund claims and contract renegotiations across supply chains.

·       Globally, the tariff regime prompted retaliatory measures from major trade partners, notably China, the EU, Canada, and Mexico. The WTO reported a sharp contraction in global trade volumes during the 2019–20 period, even prior to the COVID-19 pandemic. The lifting of these tariffs might improve trade flows, but unresolved disputes over duty reimbursements and retroactive penalties could create fresh tensions.

·       At the macroeconomic level, the protectionist climate dampened investment and slowed global supply chain integration. Should the U.S. Supreme Court confirm the CAFC ruling, it may restore investor confidence but could also provoke domestic political backlash, deepening uncertainty in American trade policy.

Implications for India

·       The fallout from Trump’s tariff policy and its legal challenges offers India both opportunities and risks. If U.S. tariffs on China are rolled back, trade flows will realign, and India could position itself as an alternative manufacturing base in sectors like electronics, pharmaceuticals, and textiles. Indian exporters — particularly in steel, aluminium, and textile industries — suffered under Trump-era tariffs, and their removal may restore competitiveness in the U.S. market.

·       However, any resurgence in U.S.–China tensions, particularly around strategic sectors, could again destabilise supply chains, with ripple effects for India. Moreover, the ongoing legal uncertainties could delay the limited trade deal India has long been negotiating with the U.S. If the Supreme Court curtails presidential authority on trade, Congress may become the dominant actor in U.S. trade decisions, requiring India to adjust its lobbying and negotiation strategies in Washington.

·       Strategically, the Trump administration used tariffs not just for economic purposes but to exert pressure in broader geopolitical arenas — especially in relation to China. For India, this raises complex questions: how closely should it align with U.S. coercive economic policies, and to what extent should it prioritise strategic autonomy, particularly in managing relations with China and Russia?

Lessons for India

·       The U.S. court case underscores the need for institutional checks and balances in economic policymaking. India must ensure that trade decisions — including tariff hikes, FTAs, and sanctions — are made within a legal and constitutional framework and are subject to parliamentary oversight.

·       Additionally, policy stability is essential. Frequent shifts in trade policy damage investor trust. India must commit to a transparent, rules-based trade environment to attract businesses looking to diversify away from China.

·       On the multilateral front, India should advocate for reforming the WTO’s dispute resolution mechanism to protect smaller economies from unilateral tariff actions. Simultaneously, India can leverage forums like the India–EU FTA and the Indo-Pacific Economic Framework (IPEF) to expand market access.

·       Domestically, the tariff crisis has highlighted the dangers of excessive dependence on a few markets. India needs to strengthen its manufacturing ecosystem — through Production Linked Incentive (PLI) schemes, logistics improvements, and workforce upskilling — to benefit from ongoing global supply chain shifts.

Conclusion

The legal battle over Trump’s tariffs is not merely about trade duties — it cuts to the core of executive authority, international trade governance, and constitutional accountability. For the U.S., the ruling could reshape how trade policy is formulated in the future. But the implications are broader: it serves as a reminder that in an increasingly interconnected world, trade stability hinges on rule-based governance and cooperation. Unilateral protectionism not only harms adversaries but also destabilises the initiators, disrupting global commerce and investor confidence alike.