Trump’s Tariff Plan B: Why the Next Five Months Could Be More Turbulent for Global Trade

The US tariff regime may appear numerically stable after the Supreme Court struck down emergency-based duties, but the policy landscape has become far more complicated. With the Trump administration swiftly activating alternative legal routes to maintain tariff levels, experts warn that the next five months could bring heightened uncertainty, legal churn, and fresh challenges for India and global trade partners.

Supreme Court Ruling Changes the Legal Path, Not the Tariff Level

The recent decision by the Supreme Court of the United States to invalidate tariffs imposed under the International Emergency Economic Powers Act (IEEPA) has reshaped the legal framework of US trade policy.

While the ruling removed the emergency-based authority used to justify sweeping tariffs, it did not significantly alter the overall tariff burden faced by American consumers. According to Sajid Chinoy, Head of Asia Economic Research at JP Morgan, the effective tariff rate remains close to previous levels — but the pathway to achieving it has become much more complex.

The Court’s scepticism toward the broad interpretation of IEEPA had been visible during oral arguments, so markets were not caught off guard. However, what followed the verdict proved more consequential.

Section 122: The Administration’s Immediate Response

Within hours of the ruling, US President Donald Trump introduced a 10% global tariff under Section 122 of US trade law, raising it to 15% the next day.

This rapid response was part of a pre-prepared contingency strategy. Chinoy explained that the administration had previously indicated it would act to preserve the effective tariff rate if IEEPA-based measures were overturned.

Currently, the effective realised tariff rate — calculated as tariff revenue collected divided by total imports — stands near 9%. At a 10% headline tariff, that rate would have slipped to approximately 7.6%. With the increase to 15%, it is estimated at around 8.8%, not far from earlier levels.

In short, while the legal instrument has changed, the macroeconomic impact in headline terms remains similar.

Why the Transition Phase Could Be Disruptive

Although the numbers look stable, the process ahead could be far more turbulent.

Section 122 tariffs are temporary and can remain in force for only five months. The administration’s strategy is widely expected to involve shifting toward country- and product-specific tariffs under Section 301 — a more elaborate and time-consuming mechanism.

Unlike emergency measures, Section 301 requires formal investigations, public consultations, and detailed hearings. During the 2018 US-China trade dispute, such investigations were lengthy and product-specific, creating significant uncertainty for businesses.

If multiple Section 301 investigations run simultaneously — potentially country by country — exporters and importers may face months of ambiguity regarding which goods will be targeted, what rates will apply, and when changes will take effect.

Even if the effective tariff rate ultimately returns to its previous level, the transition could disrupt trade planning and compliance processes.

Impact on India: Limited Relief but Rising Uncertainty

For India, the shift in tariff structure brings marginal relief but no major breakthrough.

Under the previous arrangement, India’s effective tariff rate was approximately 16.9%. With the new 15% global rate, that figure is estimated to decline to around 15.1%, a reduction of roughly 1.8 percentage points.

However, sector-specific duties under Section 232 — covering steel, aluminium, copper, and automobiles — remain unchanged. This limits the overall benefit for Indian exporters in affected industries.

More importantly, policy uncertainty looms large. India’s planned high-level visit to Washington to advance an interim trade agreement has reportedly been rescheduled as policymakers evaluate the implications of the legal shift and the US response.

No Competitive Edge Under the Uniform Tariff Regime

One defining feature of the current Section 122 framework is uniformity. All countries, including India and its competitors, face the same 15% rate (excluding sector-specific levies).

This means India neither gains a relative advantage nor suffers a disadvantage compared to other exporters in the interim period.

Countries that previously faced significantly higher tariffs may temporarily benefit from the flat rate, but this window is expected to close once differentiated tariffs under Section 301 are introduced.

Front-Loading and Investment Concerns

The looming possibility of new, targeted tariffs may prompt some countries to accelerate exports during the five-month window. However, for India, the incentive to front-load shipments appears limited given the relatively modest change in rates.

The larger concern lies in investment decisions. Businesses facing shifting tariff schedules, regulatory hearings, and potential product-level duties may postpone expansion or sourcing commitments.

For US importers and global investors, the environment has become less predictable. Even if aggregate tariff levels remain similar, the procedural complexity and evolving legal framework introduce new risks.

Conclusion: Stability in Numbers, Volatility in Process

While effective tariff levels remain close to earlier figures, the trade policy landscape is far from stable. The Supreme Court ruling has not reduced tariffs dramatically, but it has triggered a transition toward more legally intricate and time-bound mechanisms.

Over the next five months, businesses worldwide — including in India — must navigate investigations, hearings, and potential shifts in country-specific duties. The headline numbers may appear familiar, but the underlying uncertainty could prove far more disruptive for global trade.