US Supreme Court verdict on Trump tariff tonight: How Sensex, Nifty may get impacted

The impending verdict from the US Supreme Court on Trump-era tariffs is a critical juncture that could send ripples across global markets, with significant implications for India's economy. To truly grasp its importance, we must delve into the background, the current scenario, key players, and its multifaceted impact on India.

**Background Context: The Era of Protectionism**

The 'Trump-era tariffs' refer primarily to duties imposed by the US under the administration of President Donald Trump, largely between 2018 and 2020. These tariffs were primarily levied using two US trade laws: Section 232 of the Trade Expansion Act of 1962, which allows the President to impose tariffs on imports deemed a threat to national security (e.g., steel and aluminium tariffs), and Section 301 of the Trade Act of 1974, which permits the President to take action against foreign countries engaging in unfair trade practices (e.g., tariffs on Chinese goods related to intellectual property theft). This period marked a significant shift in US trade policy from multilateralism towards a more protectionist and unilateral approach, sparking global trade wars, particularly with China and European allies. The underlying philosophy was to protect domestic industries, bring manufacturing jobs back to the US, and address perceived trade imbalances.

**What Happened: The Supreme Court's Role**

The current situation involves the US Supreme Court reviewing the legality of these tariffs. Typically, such cases involve challenges to the executive branch's authority to impose tariffs under the specific statutes mentioned (Section 232 and Section 301). Petitioners, often importers or affected industries, argue that the President overstepped statutory limits or violated constitutional principles by imposing broad tariffs without adequate congressional oversight. The Supreme Court's verdict could either uphold the President's broad authority to impose such tariffs, thereby potentially cementing a tool for future administrations to use similar protectionist measures, or it could strike them down, limiting presidential power and potentially leading to a rollback of some existing duties. A ruling against the tariffs could bring greater certainty and stability to global trade, while upholding them could perpetuate trade tensions.

**Key Stakeholders Involved**

1. **US Government (Executive and Judiciary):** The President (and future presidents) whose trade policy authority is at stake, and the Supreme Court, which acts as the ultimate interpreter of US law and the Constitution.

2. **US Industries and Consumers:** Domestic industries that benefited from protection against cheaper imports, and those that suffered from retaliatory tariffs or increased input costs. Consumers faced higher prices for imported goods.

3. **Global Trading Partners (including India):** Countries whose exports were subjected to these tariffs, impacting their trade balances and economic growth. They seek fair market access and predictable trade rules.

4. **Indian Businesses and Consumers:** Indian exporters who faced tariffs on goods entering the US market, and importers who might benefit from their removal. Indian consumers could see impacts on prices of imported goods and services.

**Significance for India**

India's economy is deeply intertwined with global trade, and the US is one of its largest trading partners. The Supreme Court's verdict holds significant implications:

* **Economic Impact on Sensex and Nifty:** A positive verdict (striking down tariffs) could lead to sharp gains in Indian indices (Sensex and Nifty) due to improved global trade sentiment, reduced uncertainty, and potentially lower costs for Indian exporters. Conversely, upholding the tariffs could deepen volatility, as trade tensions persist, impacting corporate profits and investor confidence.

* **'Double Exposure':** India faces a unique 'double exposure.' Firstly, it has been directly affected by existing US tariffs, impacting its exports in sectors like steel and aluminium. The removal of these tariffs would boost India's export competitiveness. Secondly, the article mentions a 'potential 500% levy on Russian oil imports.' While this is not directly linked to the US Supreme Court's ruling on Trump-era tariffs, it highlights India's vulnerability to global geopolitical decisions impacting commodity prices. India has been a significant buyer of Russian oil, and any drastic increase in its price due to international sanctions or levies would severely impact India's import bill, current account deficit, and domestic inflation, as crude oil is a major component of India's energy basket.

* **Trade and Corporate Profits:** Lower tariffs generally mean lower costs for exporters, making Indian goods more competitive in the US market, thereby boosting corporate profits in export-oriented sectors.

* **Foreign Trade Policy:** India's Foreign Trade Policy (FTP) aims to boost exports and integrate India into global value chains. Unilateral tariffs by major economies complicate these objectives, forcing India to diversify markets and products.

**Historical Context and Broader Themes**

Historically, the global trading system, post-WWII, largely operated under the General Agreement on Tariffs and Trade (GATT) and later the World Trade Organization (WTO), promoting multilateralism and reduced trade barriers. The Trump-era tariffs represented a significant challenge to this established order, often bypassing WTO dispute settlement mechanisms. For India, navigating such unilateral actions by major powers requires a robust foreign trade policy and diplomatic engagement. India's constitutional framework places foreign trade and customs duties under the Union List (Entry 41: "Trade and Commerce with foreign countries; import and export across customs frontiers; customs duties."), giving the central government exclusive power to legislate on these matters. The government utilizes this power to formulate its Foreign Trade Policy, aiming to regulate and promote India's international trade.

**Future Implications**

1. **Global Trade Order:** The verdict could signal whether the world returns to a more rule-based, multilateral trading system or continues towards fragmented, bilateral, or unilateral trade actions. This impacts the relevance and effectiveness of institutions like the WTO.

2. **US-India Trade Dialogue:** A decision favouring reduced tariffs could pave the way for smoother US-India trade relations, potentially aiding discussions on issues like the restoration of India's Generalised System of Preferences (GSP) status, which was revoked by the Trump administration in 2019. It could also influence broader strategic economic partnerships.

3. **Indian Policy Response:** India might need to reassess its trade diversification strategies, strengthen domestic manufacturing under initiatives like 'Atmanirbhar Bharat,' and secure alternative energy sources or negotiate favourable terms for existing imports to mitigate risks from global trade and geopolitical shocks.

4. **Energy Security:** The potential 500% levy on Russian oil underscores the critical importance of India's energy security strategy, balancing geopolitical alignments with economic imperatives. India's reliance on imported crude oil makes it highly susceptible to global price fluctuations and supply disruptions, highlighting the need for strategic petroleum reserves and a push towards renewable energy sources.

In essence, the US Supreme Court's decision is not just a legal ruling but a pivotal moment for global trade, with direct and indirect consequences for India's economic stability, trade policy, and geopolitical standing.