US Court Ruling on Tariffs a Boon for India, May Shield Rupee

The report stated that the court's decision will create a more predictable global trade environment, reducing the influence of tariff weaponisation on international trade activity. This development is expected to support EM economies, including India.

"The court ruling will be positive for EM economies, including India, as trade activity hereon will not be influenced by weaponisation of tariffs; moreover, policy uncertainty will increase in the US in the near term," the report noted.

The Supreme Court of the United States, in a 6-3 majority ruling, struck down tariff measures introduced by President Donald Trump under IEEPA. The decision is seen as a key development in global trade dynamics, as it removes a major source of uncertainty related to tariff imposition.

Following the ruling, President Trump invoked Section 122 of the Trade Act to impose a 10 per cent temporary global tariff, which was later revised to 15 per cent, positioning it as an immediate substitute for the invalidated existing duties.

JM Financial said the original court ruling would help create a predictable trade environment, benefiting emerging market economies.

"We believe that the court ruling in its original form would create a predictable environment as far as the global trade practices are concerned, benefitting emerging market economies, including India," the report stated.

However, the report cautioned that the benefits could be reduced if alternative tariff measures are implemented.

"If the Trump administration circumvents the court's decision, then the benefit flowing to the EM economies will significantly reduce," it added.

The report highlighted that, as per Budget Lab, the average tariff on imports was around 16 per cent before the court's ruling, which is expected to reduce to around 9 per cent following the decision. However, if duties are imposed through alternative routes, the average tariff rate could increase to around 14 per cent.

The report also noted that policy uncertainty in the US could increase in the near term, which may impact global financial markets and trade flows.

It further said that uncertainty surrounding US growth and debt concerns could increase demand for safe-haven assets such as gold. At the same time, pressure on the US dollar due to weakening growth concerns could cushion emerging market currencies, including the Indian rupee.

So the report outlined that the court ruling is expected to support emerging market economies by improving predictability in global trade, although the final impact will depend on further policy actions by the US administration.

- ANI