On Friday, the Supreme Court ruled that Trump had exceeded his authority by imposing broad tariffs under an economic relief law. The markets initially welcomed the decision. GIFT Nifty recovered sharply after the verdict, signaling relief that a major overhang on global trade had been removed.Within hours, however, Trump announced an across-the-board 10% tariff under another legal provision. On Saturday, he said the temporary levy would be further increased to 15% – the maximum allowed under Section 122 of the US Trade Code. The provision allows tariffs of up to 15% for 150 days, after which congressional approval is required for them to continue.
Trump also indicated that during this 150-day period, the administration would explore other legally permissible routes to impose tariffs, including statutes that authorize tariffs on national security or unfair trade practice grounds.
For markets, it is less about the exact percentage and more about the unpredictability.
Kotak Mahindra AMC MD Nilesh Shah said The Street is already considering continuity. “The Street’s expectation is that the US will use various regulatory provisions to keep rates broadly unchanged. Any change will be short-lived and therefore unlikely to have a material impact on market direction.” This suggests that investors can look beyond the aggregate increase from 10% to 15%, especially if they don’t think aggregate rate pressures will change meaningfully over time.
However, the short-term impact may remain volatile. Sudeep Shah, head of technical and derivatives research at SBI Securities, said there are financial implications beyond nominal interest rates.
“An important aspect to monitor is the uncertainty surrounding the approximately $175 billion collected under tariffs over the past year and the potential implications of reimbursement claims,” he said. “That said, the situation remains fluid. New statements or alternative rate actions under different presidential authorities could reintroduce volatility in the near term.”
For India, the timing is significant. Indian equities were already under pressure due to uncertainty over US Federal Reserve policy and weakness in IT stocks. Earlier this month, India and the US reached an interim trade deal that reduced mutual tariffs on Indian goods to 18%, while India agreed to lower certain tariffs and non-tariff barriers on US imports.
The earlier agreement had allayed concerns and supported sentiment in export-related sectors. With a broader 15% tariff announcement announced on almost all US imports, investors will be looking for clarity on how the new structure interacts with the bilateral agreements.
Export-oriented sectors such as IT, pharmaceuticals, textiles and auto components could see knee-jerk reactions as traders fear margin pressure or a slowdown in demand. However, if the market believes the 15% cap is temporary and largely in line with expectations, losses could be limited.
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