Why India’s Tariff Rate Slashed to 10% Following Trump’s New Global Order

Synopsis: In a swift response to a US Supreme Court setback, President Donald Trump signed a proclamation on February 20, 2026, imposing a 10% temporary import surcharge on all nations. For India, this move ironically lowers the effective tariff rate from the recently negotiated 18% to a uniform 10% starting February 24.

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The global trade landscape underwent a seismic shift today after the US Supreme Court struck down President Trump’s previous “reciprocal” tariffs as unconstitutional. However, within hours of the 6-3 ruling, the President invoked Section 122 of the Trade Act of 1974 to sign a new executive order. This “temporary import surcharge” of 10% is set to take effect at 12:01 AM EST on February 24, 2026, and will remain in force for an initial period of 150 days.

The Legal Pivot: Section 122 vs. IEEPA

The Supreme Court ruled that the administration overreached by using the International Emergency Economic Powers Act (IEEPA) to bypass Congress for trade taxes. By shifting to Section 122, the President is utilizing a provision specifically designed to address “large and serious balance-of-payments deficits.” While this law limits the tariff to 15% for 150 days, it allows for a baseline global duty that bypasses the court’s recent “illegal” designation of earlier reciprocal levies.

Mixed Signals for Indian Exporters

For the Indian market, the news is a double-edged sword. Under the interim trade deal finalized earlier this month, Indian exports were subject to an 18% reciprocal tariff. The new 10% global surcharge effectively reduces the immediate tax burden on “Made in India” goods by 8 percentage points.

• Positive Impact: Sectors like IT services, textiles, and specialty chemicals may see a margin boost due to the lower-than-expected 10% rate.
• Policy Risk: President Trump clarified that “nothing changes” regarding India’s commitments, including the transition away from Russian crude oil, despite the broader tariff restructuring.

Also Read: How GIFT Nifty Jumped 486 Points After US Supreme Court Tariff Ruling

Exemptions and Market Reaction

The White House fact sheet confirmed that essential goods, including certain pharmaceuticals, critical minerals, and agricultural products like beef and tomatoes, will be exempt from the new 10% duty. Canada and Mexico also remain exempt under existing USMCA protections.

GIFT Nifty has already reacted with a volatile 480-point surge, reflecting the market’s relief that the 18% to 50% “tariff cliff” has been replaced by a lower 10% temporary baseline. However, with the US Trade Representative (USTR) launching fresh Section 301 investigations into “unfair trade practices,” the long-term stability of Indian exports remains under intense scrutiny.

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