India delays US trade deal after court scraps key tariffs

India has hit pause on formalizing its framework trade agreement with the United States after a landmark ruling by the US Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act, fundamentally altering the legal and economic basis of ongoing trade negotiations.

Senior government officials said the agreement—initially slated for signing in March—will now move forward only after Washington establishes a revised tariff architecture that safeguards India’s comparative advantage in the US market.

The shift follows growing uncertainty among US trade partners in the wake of the court’s decision. Malaysia has already declared its trade pact with Washington void, citing the collapse of the tariff framework underpinning the agreement, while the European Union has put its own deal on hold.

“The deal timeline has changed because the legal basis for reciprocal tariffs no longer exists,” an official said. “Any agreement we sign must now be anchored in a new tariff structure that ensures India retains a competitive edge in the US market. The US is working to rebuild that pathway.”

Two tracks of trade partners emerge

Officials clarified that India is not in a standoff with Washington but falls into a separate category of trade partners—those that have agreed to frameworks but not yet signed binding legal agreements.

Countries like Malaysia, which had formalized and signed deals based on the now-invalid IEEPA tariffs, are being forced to revisit their agreements. In contrast, India—like Europe—has the flexibility to recalibrate before signing.

“We are watching how the global tariff architecture evolves before taking the final step,” the official said.

Fresh tariff pressures loom

The evolving landscape is further complicated by new US trade actions. Washington has initiated investigations under Section 301 of the Trade Act of 1974, targeting multiple countries including India over concerns such as overcapacity in manufacturing and the import of goods linked to forced labor.

These fast-tracked probes could lead to fresh tariffs as early as May.

Additionally, negotiations between India and the US are addressing a range of issues, including non-tariff barriers and duties imposed under Section 232 of the Trade Expansion Act.

Tariff reset reshapes trade calculus

The US had earlier imposed 25% additional tariffs on select Indian exports over New Delhi’s imports of Russian oil, but these were withdrawn in February. However, following the court ruling, reciprocal tariffs have been scrapped, and Washington has instead imposed a uniform 10% duty under Section 122 of the Trade Act of 1974 on certain imports from all countries.

Despite the volatility, India has signaled its intent to stay the course on the trade pact—provided its export interests remain protected.

With a bilateral trade surplus of $58 billion and strength in sectors such as textiles, healthcare, construction goods and automobiles, New Delhi is seeking firm assurances that any new tariff regime will not erode its position in the American market.

For now, the message is clear: India is willing to sign—but only once the rules of the game are rewritten.