Trump Imposes New 10% Global Import Tariff

Trump Imposes New 10% Global Import Tariff

Why in News? 

After a major setback from the US Supreme Court, Donald Trump announced a 10% global tariff on imports from all countries through an executive order, prompting the administration to use alternative legal provisions to continue its trade protection measures.

US Supreme Court’s Verdict on Trump Tariff

• On February 20, 2026, the U.S. Supreme Court issued a landmark 6-3 decision invalidating a broad range of tariffs imposed by the Trump administration. 
• The 6-3 majority included Chief Justice Roberts, the three liberal justices, and two Trump appointees, Neil Gorsuch and Amy Coney Barrett. Justices Clarence Thomas, Samuel Alito, and Kavanaugh dissented, arguing that the statute could be interpreted to permit such actions during declared emergencies.
• The ruling centered on the administration’s use of the International Emergency Economic Powers Act (IEEPA) of 1977 to unilaterally levy import taxes.
• The Court determined that the president exceeded his legal authority by using a law intended for national security emergencies to bypass Congress’s constitutional power to tax and regulate commerce. 
• Chief Justice John Roberts, writing for the majority, emphasized that the U.S. Constitution (Article I, Section 8) vests the power to impose taxes and duties solely in Congress. The Court rejected the government’s argument that IEEPA’s authority to “regulate… importation” included the power to levy tariffs. 
• The ruling clarified that while IEEPA allows for tools like quotas or embargoes, it does not authorize the executive branch to raise revenue through tariffs without explicit legislative consent. 
• The decision specifically strikes down tariffs enacted under IEEPA, including “reciprocal” tariffs that ranged from 10% to 50% on global imports and specific duties linked to fentanyl trafficking from China, Canada, and Mexico. 
• However, the ruling does not affect sectoral tariffs imposed under other statutes, such as Section 232 (national security) or Section 301 (unfair trade practices), which continue to hit industries like steel, aluminum, and automobiles. 
• The invalidation of these duties creates a massive financial liability for the federal government, with an estimated $130 billion to $175 billion in collected revenue potentially eligible for refunds. Justice Brett Kavanaugh, in his dissent, warned that the refund process would likely be a “mess” that could take years of litigation to resolve. 

Highlights of New 10% Global Tariff

• The US administration has imposed a flat 10% ad valorem tariff on almost all imported goods, meaning an additional duty calculated on the value of imported products entering the United States. 
• This temporary import surcharge is applicable to all trading partners globally and is scheduled to come into effect from 24 February 2026, directly impacting international supply chains and export-dependent economies.
• The tariff has been legally implemented using Section 122 of the Trade Act of 1974, a rarely invoked trade provision that allows the US President to impose quantitative restrictions or tariffs without prior Congressional approval.
• The proclamation clearly states that the tariff aims to address “fundamental international payments problems”, including persistent current account deficits, rising trade imbalances, and increased reliance on imported manufactured goods. 
• In addition to Section 122, the administration plans to utilise Section 232 of the Trade Expansion Act of 1962 (for national security-based tariffs) and Section 301 of the Trade Act of 1974 (to counter unfair trade practices and intellectual property violations).

Implications of 10% Global Tariff Announcement

• Universal Consumer Cost Increases: Economists project that a 10% global tariff acts as a regressive consumption tax, potentially adding $2,100 to $2,500 in annual expenses for the average U.S. household. Because the surcharge is non-discriminatory and applied globally, domestic retailers cannot easily source alternative duty-free products. This leads to immediate price inflation in essential sectors. 
• Disruption of WTO Non-Discrimination Norms: The 10% surcharge represents a significant challenge to the World Trade Organization (WTO) principle. By applying a flat rate to all 164 member nations, the U.S. effectively ignores its bound tariff commitments. This unilateral action is expected to trigger a wave of legal challenges at the WTO and may justify retaliatory duties from major partners like the European Union and Mexico, targeting U.S. agricultural exports. 
• Strategic Supply Chain Reconfiguration: The announcement forces a radical re-evaluation of global supply chains. With a 10% baseline tax on all imported entries, the traditional cost advantage of overseas manufacturing is significantly diminished. This accelerates “near-shoring” and “friend-shoring” efforts.
• Geopolitical Leverage: The 150-day window inherent in Section 122 is being utilized as a tactical diplomatic hammer. The administration has signaled that the 10% tax could be waived or reduced for “aligned” nations that agree to specific trade concessions or security protocols. This transforms U.S. trade policy into a tool for geopolitical alignment.

Impact on India 

• • Reduction in Effective Tariff Rates: Following the invalidation of the high “reciprocal” duties, India’s export burden has temporarily decreased from a proposed 18% (under the recent interim deal) or earlier peaks of 50% to a flat 10% surcharge. This 10% levy, invoked under Section 122, replaces the IEEPA-based duties and provides immediate, though temporary, relief for Indian exporters compared to the previously threatened rates. 

• Disruption of the Interim Trade Deal: The announcement will affect the India-US interim trade agreement. India had previously made concessions—including reducing domestic duties on US goods and adjusting Russian oil procurement—to secure an 18% rate. With the US now applying a 10% rate globally, experts suggest India’s “bargaining power” has shifted.

• Relief for Labour-Intensive Sectors: Labour-intensive industries such as textiles, gems and jewellery, and leather are expected to benefit most from the lower 10% rate compared to previous punitive levels. The Confederation of Indian Textile Industry (CITI) noted that this provides a competitive window for Indian goods in the US market, which accounts for roughly 30% of India’s textile exports. 

• Continued Pressure on Strategic Exports: Despite the global reduction, Section 232 and Section 301 tariffs remain in full effect, meaning Indian steel and aluminium still face a 50% duty. Furthermore, the 150-day limit of the new 10% surcharge creates a “rolling deadline,” forcing an Indian delegation to visit Washington D.C. next week to seek long-term clarity on permanent duty structures.