US Court Strikes Down Tariffs; Jefferies Says Trump Personally Piqued By India's Policy

Trump tariffs have soured investor sentiment on D-street in recent sessions. The headline indices have declined amid the imposition of trade tariffs on August 27. Notably, the Nifty has shed over 2 per cent in the past one week alone as investors reacted to the imposition of an additional 25 per cent trade tariff by the US. However, a recent ruling by the US Court of Appeals for the Federal Circuit in Washington, D.C has called 'most tariffs' illegal.

The ruling is expected to have widespread consequences not just for the US but for the Indian economy as well, which is factoring in the impact of the cumulative 50 per cent tariffs and looking at policy measures to combat its long-term effects.

US Court of Appeals Tariffs Verdict

On August 30, the US Court of Appeals allowed the presently imposed tariffs to remain imposed till October 14. Notably, this allows the US President to appeal against the ruling. In its 7-4 decision, the court stated that the tariffs do not impact other tariffs on steel and aluminium imports.

The US court stated that the International Emergency Economic Powers Act has been used by the Trump administration to impose the tariffs. While the law provides certain powers to the US President, the imposition of tariffs is not explicitly included in the legal statute.

"The statute bestows significant authority on the President to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax," the US court said.

Notably, the IEEPA, which dates back to 1977, has been used for levying sanctions on other countries. However, Trump is the only President to use the IEEPA to impose tariffs stating that the US is facing trade imbalances, a decline in manufacturing and a flow of drugs into the US.

"It seems unlikely that Congress intended, in enacting IEEPA, to depart from its past practice and grant the President unlimited authority to impose tariffs," the US Court said.

Trump's Take On The Court Ruling

Trump took to Truth Social following the US Court's ruling and called the court' highly partisan'. He added that if the tariffs are taken away it will be disastrous for the US.

"ALL TARIFFS ARE STILL IN EFFECT! Today, a Highly Partisan Appeals Court incorrectly said that our Tariffs should be removed, but they know the United States of America will win in the end. If these Tariffs ever went away, it would be a total disaster for the Country. It would make us financially weak, and we have to be strong," Trump said in his post.

In court, Trump's Department of Justice stated that the IEEPA allows the imposition of tariffs under 'emergency provisions' that give the President the authority to regulate or block imports.

Trump's Tariffs: A Personal Pique?

Global brokerage firm Jefferies stated in its Fear and Greed report released on August 28 that conversations in New Delhi have indicated that the imposition of additional tariffs is likely to have been caused by a 'personal pique' for being restricted from mediating in the India-Pakistan conflict.

"Conversations in New Delhi at the end of last week make it clear that the tariffs are primarily the consequence of the American president's "personal pique" that he was not allowed to play a role in seeking to end the long-running acrimony between India and Pakistan following a four-day military conflict between the two countries in May,' Jefferies said.

India has repeatedly said that it does not welcome interventions by other countries in conflicts with Pakistan. Trump has claimed on multiple occasions that he ended several conflicts around the world, including the one between India and Pakistan, with the White House claiming that he should be awarded the Nobel Peace Prize.

"It's well past time that President Trump was awarded the Nobel Peace Prize," White House Press Secretary Karoline Leavitt had said in July.

India's Stance On US Tariff Imposition

Jefferies added in its report that India has not accepted third party interventions in its conflicts. Which in turn is likely to have made the US double down on the imposition of tariffs.

'India has never accepted third-party intervention in its relations with Pakistan, and this remains a "red line" despite the economic costs of depriving the 47th American President of one of his opportunities to win the Nobel Peace Prize,' Jefferies said.

Jefferies mentioned in its report that the other aspect which has served as a roadblock in the signing of an India-US trade deal is that no Indian government will open up agriculture to imports. Jefferies' estimates that India's agriculture industry employs 250 million farmers and related labour or nearly 40 per cent of the total Indian workforce.

"No Indian government, including the current government, is going to open up agriculture to imports, given the devastating impact it would have on many poor people. As noted by Jefferies' India office recently, nearly 250 million farmers and related labour derive their incomes from agriculture with the sector accounting for nearly 40% of India's workforce," Jefferies said.

Recent statements by Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman also showed support for export-focused industries and a push for domestic manufacturing and consumption. Notably, Jefferies has estimated the impact of the 50 per cent tariffs to be nearly $55 billion to $60 billion with the most negatively impacted sectors including textiles, shoes, jewellery and gems.