If you thought the trade drama between Washington and New Delhi was over, think again. On February 20, 2026, the US Supreme Court handed down a 6-3 ruling in Learning Resources Inc. v. Trump that essentially told the White House it can't just slap tariffs on whatever it wants whenever it feels like it. The court ruled that the International Emergency Economic Powers Act (IEEPA) doesn't give the President the power to tax imports.
This is a massive deal for Indian exporters who've been sweating under "reciprocal tariffs" for the last year. But don't start celebrating yet. While the court killed the old tariffs, the administration immediately pivoted to new ones. It's a classic case of one door closing and a window—or maybe a trapdoor—opening.
The IEEPA ruling explained simply
The core of the legal fight was whether the word "regulate" in the IEEPA includes the power to "tax." The Supreme Court said a hard "no." Chief Justice John Roberts and the majority argued that the power to lay and collect duties belongs to Congress, not the executive branch.
For the last year, the administration used IEEPA as a blunt instrument to impose wide-ranging duties on Indian goods, from textiles to machinery. The court basically called this an illegal power grab. By February 24, 2026, US Customs and Border Protection had to stop collecting these specific "reciprocal" and "trafficking" tariffs.
But here’s the kicker. Even though the court said the old taxes were illegal, it didn't explicitly say how or when anyone gets their money back. We're talking about an estimated $175 billion in total tariff revenue collected from various countries that might now be owed as refunds. If you're an Indian firm that paid these duties, you’re looking at a long, bureaucratic fight in the Court of International Trade to see a cent of that cash.
The Section 122 pivot
The White House didn't even wait for the ink to dry on the court's opinion before moving to Plan B. Within hours, they invoked Section 122 of the Trade Act of 1974. This allows for a "temporary import surcharge" to deal with balance-of-payments deficits.
Basically, they replaced the struck-down 18% reciprocal tariff with a new 10% global surcharge, which was quickly bumped to 15%. This new tariff is "temporary," meaning it lasts 150 days unless Congress decides to extend it.
What this means for Indian exports
- Solar Cells: On February 24, the US slapped a massive 125.87% preliminary duty on solar cells from India.
- Steel and Aluminum: These are still stuck under Section 232 tariffs. The Supreme Court ruling didn't touch these because they're based on national security, not the IEEPA.
- The 15% Baseline: For about 55% of India’s exports, the new effective tariff rate sits around 15%—lower than the 18% seen earlier in 2026, but still a headache.
Why the timing sucks for the India-US Trade Deal
Just weeks ago, on February 6, 2026, it looked like we were headed for a "historic" breakthrough. A framework for an Interim Agreement was announced. India agreed to stop buying Russian oil and promised to lower barriers for US medical devices and farm products like soybean oil and fruit. In exchange, the US was supposed to drop those 25% "additional" tariffs.
The Supreme Court verdict threw a wrench into the whole thing. India actually deferred a delegation visit to Washington right after the ruling. Why? Because the legal ground shifted. New Delhi doesn't want to sign a deal based on a 18% tariff baseline if that baseline was just declared illegal by the highest court in the land.
It’s a mess. India is now reassessing if the concessions they made—especially the risky move of ditching Russian crude—are still worth it if the US just keeps find new legal loopholes to keep tariffs high.
What exporters should do right now
If you're moving goods between India and the US, you can't afford to wait for the dust to settle. The trade environment is shifting week to week.
- File for refunds immediately. Don't assume the US government will just mail you a check. You need to work with trade counsel to file "protective claims" with the Court of International Trade (CIT). There’s usually a 180-day window after goods are "liquidated" to protest.
- Audit your HTS codes. The new Section 122 tariffs have different exemptions than the old IEEPA ones. Some products, like those already hit by Section 232 (steel/aluminum), might be exempt from the new 15% surcharge to avoid "double-taxing," but the rules are specific to the component level.
- Watch the 150-day clock. The current Section 122 tariffs expire in late July 2026. This will be the next big flashpoint. If Congress doesn't extend them, we could see another sudden drop in rates—or another frantic executive order.
The reality is that while the Supreme Court "won" a victory for constitutional law, it didn't actually bring stability to trade. For businesses on the ground in Mumbai or Chennai, the "tariff-first" mentality in Washington remains the biggest hurdle to growth. You have to play the long game on legal refunds while pricing your goods for the 15% surcharge reality of today.
