US tariff ruling: Testing time for telecom and high-tech trade

The recent decision of the United States Supreme Court to strike down the use of emergency powers for imposing broad “reciprocal” tariffs marks an important development in US trade policy.

The Court held that the International Emergency Economic Powers Act did not provide clear authority for the executive branch to impose sweeping tariffs across trading partners.

This ruling narrows the scope for unilateral tariff action under emergency frameworks and has implications for ongoing trade discussions with key partners, including India.

For India–US trade, particularly in telecom, information technology, and high-technology manufacturing, the issue is one of predictability. Over the past year, the US administration had relied on the concept of reciprocal tariffs as a negotiating instrument in trade discussions.

The possibility of sudden tariff imposition created uncertainty for exporters and investors, especially in sectors where contracts are long term and supply chains are capital intensive.

Also Read: US Supreme Court strikes down “Trump Tariff” trade powers

Legal Limits and Temporary Surcharges

Following the Court’s ruling, the US administration reportedly invoked Section 122 of the Trade Act of 1974 to impose a temporary global tariff surcharge, initially at 10% and later increased to 15%.

Section 122 allows the President to impose temporary import surcharges in situations involving serious balance of payments concerns, but the authority is limited in duration and scope.

Its use in the present context may invite further legal scrutiny, given that it was historically designed as a short-term stabilisation tool rather than a structural trade instrument.

If a 15% surcharge is applied in addition to existing Most Favoured Nation (MFN) tariffs, the effective duty on Indian exports to the US would increase significantly. In several product categories, the average applied US MFN tariff is relatively low. However, when combined with a 15% surcharge, the total tariff burden could approach or exceed 18% in certain segments.

This level is broadly comparable to figures that were being discussed in the context of a proposed Bilateral Trade Agreement between India and the United States.

The distinction lies in the nature of the measure. A negotiated tariff rate under a bilateral agreement provides clarity on scope, product coverage, rules of origin, and dispute settlement mechanisms. A temporary surcharge imposed under domestic law remains subject to time limits, judicial review, and administrative discretion.

For sectors such as telecom equipment, optical networking products, electronics hardware, and advanced manufacturing components, this difference has commercial consequences.

Implications for Telecom and Digital Trade

Telecom and IT hardware trade between India and the US operates within globally integrated supply chains. Many products in these sectors are linked to commitments under the WTO Information Technology Agreement, under which participants have bound tariffs at zero on a large number of technology products.

A uniform surcharge alters the landed cost structure of these goods, even where base tariffs are minimal. This increases input costs for US buyers and affects the competitiveness of Indian exporters.

For telecom manufacturers in India seeking to expand in the US market, a higher effective tariff reduces price advantage and may delay procurement decisions.

Telecom infrastructure deployment in the US depends on predictable capital expenditure planning by operators and data centre developers. Also, higher import costs can translate into deferred investments, renegotiation of supply contracts, and a re-evaluation of sourcing strategies.

The impact extends beyond hardware. India’s IT services exports are closely linked to digital infrastructure expansion in the US. Delays in network rollouts, cloud expansion, or enterprise IT upgrades can moderate demand for related services such as system integration, cybersecurity implementation, and managed services. Although tariffs do not directly apply to services, hardware cost increases can influence broader digital investment cycles.

At the policy level, the Supreme Court ruling reduces the scope for using emergency powers as a sustained tariff instrument. This may strengthen the case for resolving trade differences through formal negotiation rather than unilateral action.

At the same time, the use of Section 122 introduces a transitional period of uncertainty. Given that Section 122 is temporary and subject to statutory limits, its long-term applicability remains unclear.

For India, the present situation creates both risks and opportunities. In the short term, exporters face higher effective tariffs if surcharges are maintained. In the medium term, there is an opportunity to emphasise the importance of a structured and predictable trade framework through a bilateral agreement.

For technology-intensive sectors, the priority is stability. Investment decisions in telecom manufacturing, electronics assembly, semiconductor supply chains, and data centre infrastructure depend on clarity regarding market access conditions.

If the effective tariff level converges around 18% through a combination of MFN rates and surcharges, the commercial outcome may resemble figures previously discussed in negotiations. However, the economic impact differs depending on whether that rate is embedded in a negotiated framework or imposed through temporary executive authority.

In this context, India’s engagement with the US may increasingly focus on ensuring that high-technology trade is governed by transparent and durable arrangements. Telecom, IT hardware, and advanced electronics are central to both countries’ strategic and economic priorities. A stable tariff environment supports supply chain integration, cost efficiency, and long-term collaboration in emerging technologies.

Given the competitiveness of the Indian telecommunication manufacturing industry in comparison to the US telecommunication manufacturing, and the significant demand-supply gap in the US, it would be beneficial for both the US and India to have a reciprocal zero tariff regime on telecommunication equipment.

This would include products such as optical fibre, optical interconnect products and copper data cables. In addition, it would be worthwhile to have a reciprocal local content requirements in India’s Public Procurement Preference—Make in India (PPP-MII) and the US’s Build America, Buy America Act (BABA Act).

India mandates only 55% local content whereas the US mandates 100% local content in their respective regulations. Any trade agreement needs to ensure parity in such non-tariff barriers.

Overall, the US Supreme Court’s decision introduces greater judicial oversight into the US trade actions. Its broader significance for India-US trade will depend on how quickly both sides move from temporary tariff measures toward negotiated and legally robust trade commitments.

From a telecommunication perspective, this may be an opportunity to move towards a reciprocal zero tariff regime that will leverage India’s competitive advantage in this sector, and help bridge the demand gap in the US.

The author is the President of the Centre for Digital Economy Policy (C-DEP).