The Landscape of India U S Trade Relations
As of 2025, India-U.S. trade relations—a cornerstone of economic engagement between two of the world's largest democracies—are under renewed legal and policy scrutiny. This follows the reimplementation of broad-based tariffs under U.S. Executive Order 14257, which introduced a 10% baseline tariff and a 26% duty specifically on Indian goods. While these measures are grounded in domestic statutory authority, they have sparked significant debate regarding their alignment with constitutional mandates and global trade norms. The evolving landscape of India-U.S. trade relations underscores the need for collaborative approaches to ensure that bilateral trade remains equitable, rules-based, and mutually beneficial.
Under the U.S. Constitution, Congress holds the power to regulate commerce with foreign nations. However, the increasing reliance on executive instruments—most notably the International Emergency Economic Powers Act (IEEPA) and the Trade Expansion Act of 1962—has enabled unilateral tariff action by the President in situations framed as involving national security or economic urgency.
India, a key strategic and economic partner of the U.S., is directly impacted by these policy shifts. The imposition of a general 10% tariff, with sector-specific surcharges, has led India to examine a range of legal and diplomatic avenues to ensure that bilateral trade remains equitable, rules-based, and mutually beneficial.
The U.S. Tax and Tariff Regime
The U.S. tax and tariff policy currently operates under a dual framework: the Trade Expansion Act of 1962 and the IEEPA, both of which afford the President considerable discretion to regulate trade in contexts deemed sensitive or exceptional.
Trade Expansion Act of 1962:
Section 232 of this Act empowers the President to impose tariffs when imports are assessed to threaten national security. In recent years, it has served as the legal basis for tariff measures on imports of steel and aluminium—actions that have had tangible effects on major trade partners, including India. While this legal authority is well-established domestically, its application continues to be scrutinised in light of U.S. commitments under World Trade Organization (WTO) agreements.
IEEPA:
This legislation provides the executive branch with emergency powers to regulate foreign economic interactions when national emergencies are declared. Invocations of IEEPA have historically underpinned a variety of sanctions and trade restrictions. In India's case, certain goods have been subject to tariffs citing national economic interests, raising questions about the scope and proportionality of such applications.
Both instruments, while legally grounded, must be evaluated against WTO principles, which advocate for transparency, non-discrimination, and clearly delineated exceptions. The compatibility of unilateral tariffs with these principles remains a subject of legitimate and ongoing international legal discourse.
India's Response and Challenges
India has approached the evolving tariff environment with measured resolve, deploying a combination of diplomatic engagement and legal precision to assert its rights under international trade law.
Diplomatic and Economic Engagement:
India initially prioritised dialogue with the U.S. to resolve tariff issues through bilateral negotiation. Emphasising the strategic partnership between the nations, India sought a collaborative solution. When progress stalled, India availed itself of established multilateral legal mechanisms to contest certain tariff measures at the WTO.
WTO Dispute Settlement:
India has challenged the legality of the U.S. tariff regime under the Dispute Settlement Body (DSB) of the WTO, citing violations of the General Agreement on Tariffs and Trade (GATT) 1994 and the Agreement on Safeguards. India's primary contentions include (a) the insufficiency of national security as a blanket justification, and (b) the potentially disproportionate and discriminatory effects of these tariffs on emerging economies.
The outcome of this legal challenge will not only influence the scope of unilateral tariff action under international law but also shape future conduct between the two countries within the WTO framework.
Domestic Policy Responses:
On the domestic front, India has examined proportionate countermeasures, including calibrated tariffs on select U.S. imports. In parallel, India continues to enhance its trade diversification strategy by strengthening regional partnerships and exploring bilateral agreements beyond the current impasse, including through forums such as the Regional Comprehensive Economic Partnership (RCEP).
Importantly, India's approach remains legally principled and aligned with its longstanding support for a multilateral, rules-based trading system.
Conclusion
The recent challenges in U.S.–India trade relations underscore the critical importance of mutual legal respect and transparent policymaking. While the U.S. executive's reliance on statutory authority for tariff action is domestically legitimate, its broader implications for bilateral and multilateral trade structures merit cooperative review.
Simultaneously, the rise of digital taxation, cross-border services, and evolving trade models demands forward-looking legal and regulatory frameworks that reflect the contemporary global economy. In this context, India and the U.S.—both integral members of the WTO and participants in the OECD tax dialogue—are uniquely positioned to lead the development of equitable trade and tax norms.
Going forward, it is essential that both nations reaffirm their commitment to legal reciprocity, multilateralism, and constructive negotiation, thereby setting a model for international economic engagement in an era of rapid transformation.
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