Section 122 allows the US president to levy a temporary import surcharge of up to 15% for up to 150 days, unless extended by Congress. The provision can be invoked in situations involving serious balance of payments or international financial pressures.
According to a senior official aware of the matter, the visit of India’s chief negotiator for US trade talks has been postponed, and a date for the next round of in-person talks will be decided later.
A three-day round of discussions between the chief trade negotiators of the two countries was to begin in the US on 23 February.
The postponement comes at a time when the US has capped additional tariffs at 15% for all countries for a five-month (150-day) period, which is being seen by Indian exporters as a rare window of clarity in an otherwise volatile trade environment, particularly for labour-intensive sectors that depend heavily on the American market. Under the revised framework, imports into the US will face a uniform 15% tariff, in addition to the standard Most Favoured Nation (MFN) duty applicable to each product category.
Crucially, the 15% rate will apply equally across competing supplier nations, removing the uncertainty and country-specific tariff differentials that had distorted pricing calculations in recent months, experts said.
Query sent on Sunday to commerce secretary Rajesh Agarwal remained unanswered till press time.
For India’s labour-intensive sectors—including garments, footwear, leather goods, home textiles, handicrafts, gems and jewellery, and engineering goods—the five-month window could prove commercially significant.
Positive shift for India
India’s labour-intensive sectors contributed about $25.5 billion to US exports in FY25, according to the commerce ministry. Labour-intensive sectors accounted for nearly 30% of India’s total goods exports to the US in FY25.
“These segments operate on thin margins, employ large numbers of workers, and are highly sensitive to changes in landed cost in the US market. A predictable 15% tariff ceiling allows exporters and buyers to recalibrate contracts, pricing and shipment schedules with greater confidence,” said Dr Dharmveer, assistant professor, department of economics, Delhi School of Economics.
The US Supreme Court’s ruling has effectively reset the US tariff landscape, said Madhavi Arora, chief economist, Emkay Global Financial Services Ltd. “It creates immediate relief for several trading partners, including India, and reduces the intensity of tariff asymmetry across Asia.”
For India, the shift is materially positive. Nearly 55% of India’s exports to the US will now face a 15% tariff, compared with as high as 50% before the bilateral understanding and 25% after the interim deal, Arora said. Around 40% of exports—including electronics, pharmaceuticals and petroleum products—remain exempt, while the rest face sectoral tariffs under Section 232.
“This brings India’s effective tariff rate in the US to roughly 11–13%, which is competitive relative to China and broadly in line with Asian peers,” she added.
The universal tariff of 10%, raised to 15% the following day, has been imposed by US President Donald Trump under Section 122 of the Trade Act of 1974.
Competitive advantage
“We are not at a disadvantage anymore. Now everyone faces the same tariff, which levels the playing field. Whenever there is a universal tariff, it ultimately means customers are paying that tariff. So we are not at a disadvantage—in fact, it is positive for us since the 15% rate applies to all nations,” said Pankaj Chadha, chairman, Engineering Export Promotion Council (EEPC).
“As we have not yet signed the deal, we will wait and watch how countries that have already signed agreements respond to the evolving situation,” Chadha said.
In fact, an expert said that India was in a better position now.
“In categories such as diamonds and coloured gemstones, India is moving into the zero-duty bracket as per the deal that the government has agreed upon. This will act as a big booster for the sector. India is a global hub for cutting and polishing, and the US is a big market for us. So this will significantly improve our competitiveness,” said Vipul Shah, former chairman of Gem & Jewellery Export Promotion Council (GJEPC) and the managing director of Mumbai-based Asian Star Co. Ltd.
The 15% tariff on all countries will give India’s gems and jewellery sector an added advantage over key competitors such as China and Thailand, and help increase export growth to the US, Shah said.
Gems and jewellery exports to the US stood at $9.95 billion in FY24 and rose marginally to $9.97 billion in FY25.
Key Takeaways
- India and US stopped their trade deal meetings because of a US Supreme Court judgement and subsequent events.
- The US now charges a flat 15% tax on imports from almost every country for the next five months.
- This is actually good news for India because it replaces much higher taxes that were hurting Indian goods.
- Since everyone pays the same 15%, India’s products are now more competitive.
- This change helps sectors like jewellery and clothing, which employ millions of Indian workers.
The numbers game
India’s leather exports increased from $687.61 million in FY24 to $789.07 million in FY25, registering a year-on-year growth of about 14.8%. The rise suggests a recovery in external demand after a period of volatility and indicates improving order flows from key markets, particularly the US and parts of Europe. Industry representatives say that greater tariff stability and easing cost pressures could further support export momentum and help the sector regain scale in the coming years.
“The first and foremost requirement is stability in tariffs—whether it is 18%, 15%, 10% or whatever level is decided. That is the primary concern. However, a 15% tariff makes us competitively placed, as it puts us at par with other exporting nations,” said Sanjay Leekha, chairman, Leather Sector Skill Council (LSSC), an industry-led body under the Skill India Mission.
“Earlier, we were at a disadvantage because of the higher tariff, and that will immediately go away,” he said.
“At the industry level, our exports to the US are about $1 billion. Under a stable tariff regime, this figure can easily double over the next few years,” said Leekha.
Exports of another labour-intensive sector, footwear—which is expected to benefit from the reduced 15%—rose from $391.67 million in FY24 to $461.23 million in FY25, registering a 17.76% growth.
In FY25, India’s exports to the US were led by electronics goods at $14.59 billion, followed by drugs and pharmaceuticals at $10.5 billion, textiles at $10.32 billion, and gems and jewellery at around $10 billion, according to government and industry data.
Bilateral trade in goods between India and the US rose to $131.84 billion in FY25, growing 10.1% over the previous year, according to commerce ministry data. Indian goods exports to the US increased 11.6%, to $86.51 billion in FY25 from FY24. Imports from the US rose by a smaller margin of 7.4%, to $45.33 billion in FY25 from FY24.