Legal uncertainty surrounding American tariff policies prompts India to adopt a cautious approach on bilateral trade negotiations

Repeated legal setbacks faced by former US President Donald Trump over his tariff policies are creating fresh uncertainty around the future of global trade negotiations and could delay progress on the proposed India-US Bilateral Trade Agreement (BTA), according to trade experts and policy analysts.

The latest development came after a US federal court struck down the 10 per cent global tariffs introduced by the Trump administration, calling them “invalid” and “unauthorised by law.” The tariffs had been imposed under Section 122 of the US Trade Act of 1974 on February 20, 2026, shortly after an earlier Supreme Court ruling invalidated Trump’s reciprocal tariff framework.

Experts believe the continuing legal disputes over US trade policies make it difficult for countries like India to commit to long-term agreements with confidence.

India Advised to Wait for Stable US Trade Framework

Ajay Srivastava, Founder of Global Trade Research Initiative (GTRI), said India should avoid rushing into a bilateral trade agreement until the United States develops a more predictable and legally stable tariff system.

According to him, repeated court interventions against US tariff measures indicate deep uncertainty within American trade policy. He noted that while Washington expects India to reduce tariffs across multiple sectors, the US itself is not showing willingness to lower its standard Most-Favoured-Nation (MFN) tariff rates significantly.

Experts warn that under such circumstances, India risks offering permanent market access benefits without receiving meaningful reciprocal tariff advantages from the US side.

Court Ruling Seen as Positive Signal for WTO Norms

Trade analysts said the ruling also strengthens the importance of rules-based global trade systems under the World Trade Organization (WTO).

Shishir Priyadarshi, President of Chintan Research Foundation and former Director at the WTO, said the decision is a reminder that broad unilateral tariffs imposed by the Trump administration were inconsistent with WTO norms.

He added that the court’s intervention sends a positive signal for multilateral trade governance, though uncertainty still remains because the US administration could attempt to use alternative legal mechanisms to impose new tariffs in the future.

Section 122 Tariffs Faced Weak Legal Foundation

The United States Court of International Trade ruled in a 2-1 decision on May 7 that the Trump administration exceeded powers granted by Congress under Section 122 of the Trade Act of 1974.

Section 122 allows temporary tariffs of up to 15 per cent for a maximum of 150 days to address severe balance-of-payments issues. However, analysts argued that the US economy no longer faces the type of currency or payment crisis for which the provision was originally designed.

Srivastava explained that since the US operates under a floating exchange rate system and continues to attract strong global capital inflows, the legal justification for emergency tariffs appeared weak.

Limited Impact for Now as Appeals Continue

Despite the ruling, the tariffs are not being removed nationwide immediately. The court’s order currently applies only to the parties involved in the case, including the state of Washington, spice importer Burlap & Barrel, and toy company Basic Fun!.

The US government is expected to challenge the ruling through appeals, meaning uncertainty over tariff policy is likely to continue in the near term.

Trade experts noted that the legal battle has already started affecting international trade negotiations. Countries are becoming increasingly cautious about entering long-term trade agreements with the United States amid fears of sudden policy reversals.

US May Shift Toward Sector-Specific Trade Actions

With both reciprocal tariffs and Section 122 tariffs facing legal defeats, analysts believe the US administration may increasingly rely on targeted trade measures such as Section 301 investigations and Section 232 national-security tariffs.

These tools could potentially impact sectors including steel, semiconductors, pharmaceuticals, automobiles, and critical minerals.

Experts say such targeted actions may continue to create volatility in global trade relations and could complicate ongoing negotiations with major economies, including India.

India Likely to Maintain Strategic Trade Caution

India is expected to continue balancing its trade interests carefully while protecting domestic industries and export competitiveness. Policymakers are likely to closely monitor future US court decisions, tariff policies, and WTO developments before finalising any major trade commitments.

The outcome of these legal and policy battles in the United States could play a crucial role in shaping the future of India-US economic relations and broader global trade dynamics in the coming years.