Indian stock markets are likely to attempt a relief rally this week, however, but fresh twists in US trade policy are likely to keep sentiment fragile. A weekend in Washington has once again unsettled global markets, with investors grappling with renewed uncertainty around tariffs.
After a landmark 6–3 ruling by the US Supreme Court that declared tariffs imposed under the International Emergency Economic Powers Act (IEEPA) illegal on Friday; US President Donald Trump announced a sharp policy pivot, unveiling a fresh 10% global tariff to replace levies that were struck down by the US Supreme Court. Calling the court’s ruling “terrible”, Trump openly criticised the judges who rejected his earlier trade measures.
President Trump responded by invoking Section 122 of the Trade Act of 1974, which allows temporary tariffs with clear limits. A flat tariff was imposed on all trading partners, initially at 10% on Friday and later raised to the maximum permissible 15% on Saturday.
Terming the verdict “extraordinarily anti-American”, Trump also indicated that his administration would actively explore other legally permissible tariff routes in the months ahead. While the latest developments, reduced tariff pressure in the near term, uncertainty remains over what policy steps may follow once the temporary window expires.
Why India and Asia Stand to Gain – Explained
From an Indian investor’s perspective, Elara Capital viewed the developments as incrementally positive. India, which was earlier expected to face tariffs of up to 18% under the now-invalid IEEPA framework, will instead pay a 10% tariff on nearly 60% of its exports to the US. This effectively brings India’s policy-implied effective tariff rate down to 9.1%, sharply lower than the peak rate of 32.7% seen in calendar year 2025.
As per the brokerage, its calculations indicate that India’s effective tariff rate is now broadly at par, and in some cases lower, than peers such as Vietnam, Thailand, Bangladesh and Cambodia, with over one-third of India’s exports to the US remaining completely exempt from tariffs.
“Following the Supreme Court ruling, tariffs are likely to become increasingly sector focused rather than economy wide, with the administration expected to use the next few months to complete investigations under Sections 232, 201 and 301, which are structurally more durable,” Elara Capital said in a recent report.
As per the SC ruling, the IEEPA is meant for national emergencies and cannot be used to justify broad trade tariffs. As a result, all tariffs imposed under this law were declared illegal. This ruling effectively dismantled the existing tariff framework overnight.
Countries that were facing sharply higher duties under the emergency law, including India, were no longer required to pay those rates. The decision also raised the possibility that the US government may have to refund a portion of tariffs already collected under the now-invalid framework.
The brokerage also estimated that the invalidation of IEEPA tariffs could force the US government to refund roughly $150–155 billion in previously collected duties, potentially widening the fiscal deficit by about 50 basis points of GDP. While this development removed a major overhang for markets, Elara Capital cautioned that policy uncertainty was far from over, as investors waited for clarity on which tariffs would ultimately remain in force after the 150-day Section 122 window expires.
The brokerage further highlighted that Asia as a whole was likely to see incremental relief, with the US’s export-weighted effective tariff rate on the world expected to fall to about 13% from 16.9%. Emerging market Asia assets, including equities and currencies, could therefore benefit from a combination of easing tariff pressures, supportive valuations, softer inflation trends and resilient growth.
“Among FX and equities, emerging Asia is expected to receive an incremental tailwind from the cancellation of IEEPA tariffs and the imposition of lower rates under Section 122, raising the probability of Asian equities outperforming US equities in the near term,” Elara Capital added.
For investors, Elara Capital’s analysis suggested that while headline risks around trade policy remain elevated, the balance of risks had shifted modestly in favour of India and broader Asian markets, making them relatively better placed amid ongoing global trade realignments.
Will it impact US Fed rate cuts?
On the macro front, the brokerage maintained its view that easing tariff pressures were inflation-positive, reinforcing expectations of cumulative 75 basis points of rate cuts by the US Federal Reserve in calendar year 2026, with most of the easing likely in the second half of the year.
“While the ruling removes a critical tail risk, the intertemporal lag before the next policy move could raise uncertainty, prompting US importers to front-load purchases in the first half of CY26 and adopt a wait-and-watch approach thereafter,” the report noted.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
