India, China emerge as key beneficiaries after US Supreme Court strikes down Trump’s emergency tariffs – Firstpost

In a sweeping setback to President Donald Trump’s trade strategy, the US Supreme Court has struck down his emergency tariffs, upending a regime that had redrawn global supply chains and unsettled world markets over the past year.

In a
ruling on Friday, the court held that President Donald Trump had acted beyond his authority in invoking the International Emergency Economic Powers Act (IEEPA) to slap sweeping tariffs, compelling the administration to roll back duties that had weighed heavily on exporters such as India and China.

In a reversal, economies that were
among the hardest hit by the tariff offensive now stand to gain the most from its rollback.

Asia gets breathing room

Economists at Morgan Stanley estimate that the weighted average tariff rate on Asian exports to the US will decline to 17 per cent from 20 per cent. Duties on Chinese goods are projected to fall sharply to 24 per cent from 32 per cent.

For India, which had faced elevated tariffs across several product categories, the ruling offers immediate respite for sectors ranging from engineering goods and auto components to textiles and pharmaceuticals.

Bloomberg Economics calculates that Trump’s proposed fallback — a flat 15 per cent global levy — would result in an effective average tariff rate of roughly 12 per cent, the lowest since the administration unveiled its so-called “Liberation Day” tariffs in April.

“The peak level of uncertainty on tariffs and trade tensions has passed,” Morgan Stanley economists said in a note, though they warned that the relief could prove short-lived if Washington pivots to sector-specific or country-targeted duties.

Winners, losers and a reset field

The ruling has scrambled the competitive calculus among America’s trading partners.

China, which also saw a separate 10 per cent fentanyl-linked tariff invalidated, now faces significantly lighter duties. Canada and Mexico — similarly subject to fentanyl-related levies — stand to benefit as well, particularly if exemptions under the US-Mexico-Canada Agreement (USMCA) remain intact.

But not every economy emerges stronger.

The UK and Australia, which had negotiated preferential 10 per cent rates under the earlier “reciprocal” framework, now confront a uniform 15 per cent baseline — effectively losing their negotiated advantage. Japan, which had previously operated at what was then a competitive 15 per cent tariff level, has also seen that edge erased.

In effect, the court has levelled the playing field — but at a higher common floor for some of America’s allies.

Limited macro impact — for now

Despite the legal shock, economists suggest the immediate macroeconomic effects may be contained.

Goldman Sachs estimates that the combined impact of the Supreme Court decision and the administration’s newly announced Section 122 tariff would trim the cumulative increase in the effective tariff rate since the start of 2025 from just over 10 percentage points to around 9 percentage points.

Imports from countries benefiting from tariff reductions are likely to pick up in the coming months. However, analysts say that boost may be offset by inventory drawdowns, rerouting of trade flows and marginal sourcing adjustments elsewhere.

Even as the administration prepares to stop collecting the now-illegal IEEPA-based duties at midnight, Trump has warned that countries attempting to “play games” with existing trade agreements could face harsher penalties under alternative legal authorities.

In a series of posts on Truth Social,
the president said nations that walk away from negotiated deals — or seek to exploit the Supreme Court’s decision — would be met with “much higher” tariffs.

He said that while the court invalidated his use of emergency powers, it affirmed his authority to deploy tariffs under other statutes “in a much more powerful and obnoxious way, with legal certainty.” Trump also floated the possibility of imposing new license fees on trading partners, though he offered no details.

With inputs from agencies.