Context

• The global trade landscape is often shaped by the clash between national economic strategies and international legal commitments.
• This tension was nowhere more evident than in U.S. President Donald Trump's sweeping imposition of tariffs, an unprecedented use of executive authority that challenged both the rules of international trade and the internal checks and balances of American constitutional governance.
• While such actions had far-reaching implications globally, including for India, they also triggered significant domestic resistance, notably from small U.S. businesses.
• The resulting legal and geopolitical contestations offer a case study in the fragility of global trade norms and the enduring importance of multilateral institutions. 

The Tariff Regime: A Breakdown of Trade Norms

• Trump’s administration enacted tariffs ranging from 10% to 135% on imports from over 100 countries, ostensibly to address the U.S.'s global trade deficit.
• These sweeping measures represented a sharp deviation from the norm of negotiated tariff commitments under multilateral and bilateral trade agreements.
• Tariffs, by nature, are carefully formulated instruments of economic policy derived from extensive negotiations, often embedded in World Trade Organization (WTO) schedules of commitments.
• Their arbitrary revision undermines predictability and stability in international commerce, two cornerstones of successful cross-border business operations.
• What made the Trump tariffs particularly controversial was their scope and rationale.
• The justification, a generalised national emergency due to trade deficits, was both overly broad and legally tenuous.
• It ignored the nuanced nature of trade imbalances, particularly the United States' substantial surplus in services trade.
• For instance, while the U.S. claimed a $44.4 billion trade deficit with India, it did not account for earnings from services such as education, digital platforms, and defence exports, which, according to the Global Trade Research Initiative, actually placed the U.S. in a $35–40 billion trade surplus position with India.

Executive Overreach and Legal Pushback

• Executive Overreach
  • Perhaps even more concerning than the economic implications was the constitutional dimension.
  • The tariff orders reflected a dangerous overreach by the executive branch, sidestepping the legislative and judicial oversight enshrined in the U.S. Constitution.
  • This disruption of the separation of powers drew sharp criticism from within the U.S. itself.
• The Legal Pushback
  • In a landmark case, five small- and medium-sized American businesses, from sectors as diverse as wine, bicycles, and musical circuits, challenged the tariffs at the U.S. Court of International Trade (CIT).
  • They argued that the executive action violated established trade commitments and harmed their economic viability.
  • The CIT’s decision on May 28, 2025, marked a significant legal rebuke.
  • The court ruled that the tariffs far exceeded the President’s lawful authority and warned that invoking national emergency could not be used as a carte blanche to override constitutional limits or rewrite international obligations.
  • Nonetheless, the ruling was quickly stayed by an appeals court, rendering the decision temporarily ineffective.
  • Meanwhile, the Trump administration continued to defend the tariffs as strategic leverage in ongoing trade negotiations, even proposing the One Big Beautiful Bill (OBBB).
  • This bill would grant the executive sweeping immunity from judicial scrutiny, raising new alarms about erosion of democratic checks and balances.

India’s Predicament in a Shifting Trade Environment

• India found itself at a precarious juncture in this reconfigured trade environment.
• While the U.S.-India trade dialogue continued, India remained under punitive U.S. tariffs, 50% on steel and aluminium, despite reaching a "mutually agreed solution" with Washington in 2023 that had initially halted WTO litigation on the matter.
• India's restraint contrasted with other nations like Switzerland, Norway, China, and Türkiye, which had successfully challenged the tariffs through the WTO dispute mechanism.
• Moreover, India’s potential strategic advantage arising from the U.S.-China trade standoff was neutralised by two developments: a pause in retaliatory tariffs between Washington and Beijing, and Trump’s threats to impose tariffs on Apple products manufactured in India.
• Such erratic policies underscored a larger truth, the transactional nature of Trump-era diplomacy meant that no long-term strategic alignment could be taken for granted, even with partners like India.

The Road Ahead: Balancing Interests and Upholding Multilateralism

• Given these complexities, India's approach to any future trade deal with the U.S. must be guided by cautious pragmatism.
• Key concerns include:
  • Tariff Elimination: Removal of all additional U.S. tariffs on Indian exports must be non-negotiable.
  • Digital and Service Trade: The agreement must safeguard India’s digital services sector from U.S. retaliation and address broader issues such as cross-border data flows.
  • Remittance and Investment Protection: The OBBB’s proposed 3.5% tax on remittances must exclude Indian citizens, and U.S. investments in India, like Apple, should not face retaliatory tariffs.
  • Visas and Services Access: Long-standing issues with H-1B visa restrictions need resolution as they are central to India's global services trade.
• Need for a Firm and Strategic Approach
  • Most critically, any agreement must align with India’s WTO commitments.
  • Despite the U.S.'s increasing disregard for multilateral forums, WTO rules remain the only reliable framework for ensuring fair and rules-based trade, especially for developing economies like India.
  • As affirmed during its G20 presidency, India has a responsibility to help uphold this global order.
  • Finally, India must reserve the right to walk away from any suboptimal trade agreement. Trump’s tariffs, although damaging, are not immutable.
  • The internal legal and constitutional challenges within the U.S. itself suggest that these policies may not endure.
  • India must, therefore, adopt a firm and strategic approach, prepared for both negotiation and resistance.

Conclusion

• The Trump-era tariff policy was a seismic shift in U.S. trade strategy, characterised by unilateralism, constitutional overreach, and disregard for multilateral norms.
• While the immediate economic impact was global, including on countries like India, the more enduring consequences may be legal and institutional.
• The resistance mounted by small U.S. businesses and the critical stance of American courts hint at the resilience of constitutional checks and the importance of judicial oversight.
• For India, the episode offers important lessons: the value of multilateral institutions, the risks of transactional diplomacy, and the importance of safeguarding national interests in trade negotiations.