On February 20, 2026, the US Supreme Court ruled 6-3 that the International Emergency Economic Powers Act does not authorize the president to impose tariffs. Chief Justice Roberts, writing for the majority, held that tariff imposition is a form of taxation, a power the Constitution reserves for Congress, not the executive. Within hours of the ruling, Trump signed an executive order terminating IEEPA tariffs and immediately moved to replace them under a different statute, Section 122 of the Trade Act of 1974.
What the Data Shows
The ruling's commercial scale is hard to overstate. Penn-Wharton Budget Model economists estimate that IEEPA-based tariff collections total approximately $175 billion to $179 billion, a figure that exceeds the combined fiscal 2025 spending of the Department of Transportation and the Department of Justice. More than 2,000 lawsuits seeking refunds have been filed at the US Court of International Trade, including by major US companies such as FedEx, Costco, L'Oreal, Dyson, and Nissan North America. A CIT judge has directed the government to issue refunds with interest. That interest is accruing at an estimated $650 million per month.
The Section 122 tariffs took effect February 24 as a 10% across-the-board import surcharge on goods from all countries, effective for a 150-day period. Trump announced the following day his intention to increase the rate to 15%, the maximum allowed under the statute. But Section 122 is a constrained tool. The authority requires a "large and serious United States balance-of-payments deficit" as its legal trigger, is capped at 15%, and expires after 150 days unless Congress acts to extend it. Whether a trade deficit legally qualifies as a balance-of-payments deficit is genuinely disputed, and the Trump administration's own lawyers had previously argued in the IEEPA case that Section 122 "does not have any obvious application here." Twenty-four states filed a lawsuit in March 2026 challenging the Section 122 tariffs, arguing that the balance-of-payments conditions required by the statute do not apply. Section 232 and Section 301 tariffs, covering steel, aluminum, and most Chinese imports, remain in place throughout.
For India specifically, the goods picture changed significantly between the two regimes. India's tariff rate under IEEPA had been 18%, reduced from an initial 26% following the US-India interim trade framework announced February 6; under Section 122, that rate dropped to 10%. That matters for India's pharmaceutical, textile, and manufacturing exporters. For India's technology sector, none of this is directly applicable.
What This Means
India's IT services exports aren't physical goods. They don't move through US customs or carry a Harmonized Tariff Schedule classification. Software delivery, application development, AI engineering, cloud infrastructure work, and every other form of digital service exported from India to American clients falls entirely outside the goods tariff regime, whether that regime runs on IEEPA authority, Section 122, or anything that comes next.
With 54% of India's software service exports directed to the US, the sector remains unaffected by the tariff regime and continues to represent one of the most structurally resilient parts of the bilateral economic relationship. The numbers backing that resilience are substantial. India's IT and BPM sector crossed $315 billion in total revenue in FY2026, with exports projected to exceed $246 billion this fiscal year, according to the India Investment Intelligence 2026 report. India software services exports are valued at $165 billion in 2026 and forecast to reach $206 billion by 2031, per the India IT Services Analyst Report 2026. US clients account for approximately 57% of India's IT-BPM revenues, making American companies the dominant demand source for Indian technology services by a wide margin.
What the tariff volatility of the past year has done, though, is accelerate a set of strategic conversations that were already underway. American companies that depend on Indian engineering talent aren't managing goods tariff exposure; they're dealing with a different set of structural pressures: domestic hiring costs that remain high, an H-1B pipeline that has tightened, and tech hiring demand that continues to outpace domestic supply. Companies offshoring to India increasingly cite these supply-side constraints, not cost arbitrage alone, as the primary rationale. Employer of Record arrangements, which allow US companies to hire Indian professionals as direct employees without setting up a local legal entity, have become the preferred entry point for mid-market companies that want direct control over talent quality without the setup overhead of a captive structure.
For goods importers, the picture is less settled. Treasury Secretary Bessent has stated that combining Section 122, Section 232, and Section 301 tariffs "will result in virtually unchanged tariff revenue in 2026," a comment that signals the administration's intent to preserve total tariff impact regardless of the legal vehicle used. Section 122 doesn't require the lengthy investigations that other trade statutes demand, so the president can act fast, but the 150-day expiry date means the window is already running.
What to Watch Next
Section 301 investigations are the variable most worth tracking for companies with India goods exposure. The Trump administration announced in March that it would begin investigations of 15 countries and the European Union under Section 301(b), which can produce tariffs that are neither time-bound nor capped at 15%. Any country currently sitting at 10% under Section 122 could face a substantially higher Section 301 rate before year-end if those investigations conclude adversely.
Separate from that, the CIT refund proceedings remain unresolved. The court has ordered refunds with interest, but the administrative mechanics of processing thousands of claims across entries in different procedural postures are genuinely unclear. Companies that paid IEEPA tariffs and haven't yet recovered them face real balance sheet uncertainty until the government provides implementation guidance.
A full bilateral trade agreement between the US and India is expected by late 2026 or 2027 per the current roadmap, and its completion would provide a more stable framework for goods exporters than the current patchwork of interim agreements and expiring surcharges. Whether that timeline holds, given the pace of legal challenges to Section 122 and the administration's simultaneous use of multiple statutory tools, remains an open question.
The Supreme Court's ruling affirmed a constitutional principle most trade lawyers considered settled: the power to tax belongs to Congress, not the executive acting through emergency declarations. But affirming that principle hasn't produced policy stability. It produced a different authority with shorter time limits, lower rate caps, and a statutory trigger that courts may ultimately reject. For companies hiring Indian tech talent, the tariff debate is largely beside the point, the structural case for India hasn't moved. For everyone else, the trade policy clock is ticking and July 24 is closer than it looks.