With the US Supreme Court scrapping the International Emergency Economic Powers Act (IEEPA) tariffs last month, the Trump administration has imposed 10% global tariffs under Section 122 for five months. But the United States Trade Representative (USTR), amid the turmoil in West Asia, could be working on a new tariff structure that could serve as the legal basis for its trade agreements.

The new tariff structure could be built around the Section 301 investigations that the US launched last week. The tariffs resulting from these investigations could be the basis of the American trade agreements, including the India-US deal, which was agreed to but not formally signed.

International trade experts said that US trade deals have lost their economic value after the IEEPA ruling. This is because countries like Japan, South Korea, Vietnam, Indonesia, Bangladesh, India, and the European Union had accepted tariffs of 15–20% and offered significant concessions on market access, procurement, and regulations. After the court struck down the reciprocal tariff policy, Washington imposed a uniform 10% tariff on all trading partners.

Comparative advantage

A Commerce Ministry official explained on Monday (March 16) that any trade deal with the US that India signs would be focused on the upcoming tariff structure or comparative advantage that India gets in the US market, and that the USTR is recreating a tariff structure.

This is because several US trade partners have begun to express doubts about their trade deals following the IEEPA ruling. While Malaysia on Monday declared its trade deal with the US null and void, citing the collapse of the legal basis for the tariffs that supported it, the European Union had also put the EU-US trade deal on hold.

The US last week launched two Section 301 investigations against several countries, including India. While one cites structural excess capacity and overproduction in certain manufacturing sectors, the other cites failure to prohibit imports of goods produced using “forced” labour. But the purpose could be to create a reciprocal tariff-like structure.

“The Section 301 investigations signal that even countries that negotiated trade arrangements remain exposed to new US investigations and potential tariffs. For many governments, this combination raises a fundamental question: why maintain politically costly concessions if the same tariff treatment applies without a deal and trade pressure continues anyway,” Ajay Srivastava, head of the Delhi-based think tank Global Trade Research Initiative (GTRI), said.

The fast-track nature of the investigation means that USTR will have new legal powers to impose differential tariffs on countries by May. Deborah Elms, Head of Trade Policy at Singapore-based Hinrich Foundation, said in a social media post that this is a “very fast” investigation with a short comment window and the mandated hearing in early May.

“The reason for this unusually rapid inquiry is that the statutory authority for existing US tariffs currently set by the Trump administration at 10% globally under a different legal power, Section 122 of the Trade Act of 1974, will expire on 27 July. The USTR’s goal is to replace these Section 122 tariffs with new measures by July,” Elms said.

Stronger legal basis

Elms said that, unlike other tariff authorities, Section 301 is unlikely to get overturned by the US Courts or involve Congress: “Any penalties that get applied are likely to be long-lasting, particularly since Section 301 empowers the executive branch to modify, adjust, or reopen cases at will in the future.”

While Indian government officials have said that the final trade deal will take care of the Section 301 tariffs, the USTR, in its investigation, has said that India has “structural excess capacity and production”.

The top US trade body said that in 2025, India had a bilateral trade surplus with the US of $58 billion, and that India’s global goods trade surplus sectors include textiles, health, construction goods, and automotive goods.

“For example, evidence suggests the solar module sector is plagued by excess capacity, including that India’s current module manufacturing is nearly triple the annual domestic demand. India also has created significant excess capacity in petrochemicals, steel, and other industries,” USTR said.

Global response, shaky US deals

Following the US Supreme Court order, the European Commission is seeking “full clarity on the steps the United States intends to take following the recent Supreme Court ruling” on the IEEPA and that “the current situation is not conducive to delivering fair, balanced, and mutually beneficial transatlantic trade and investment”, as agreed to by both sides.

Malaysia’s Minister of Investment, Trade and Industry, Johari Abdul Ghani, announced that the Agreement on Reciprocal Trade (ART) between Malaysia and the United States was now “null and void.”

Reuters reported earlier this month that top South Korean officials have said their bilateral trade deal remains valid despite a ⁠U.S. Supreme Court decision in February that struck down a large swath of Trump’s tariffs. Officials in Seoul have, however, voiced concerns about the impact ⁠of $350 billion of US investments under a bilateral trade ⁠deal on an already weak won currency and said that projects would be based on consideration of commercial feasibility and foreign exchange market conditions, the news agency reported.