The US tariff regime on Indian goods has shifted legal foundations twice in under two months, and it may shift again before summer. On February 20, 2026, the Supreme Court ruled in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the president to impose tariffs, invalidating the entire IEEPA tariff architecture. Within hours, President Trump signed an executive order imposing a new 10% global tariff under Section 122 of the Trade Act of 1974. That flat-rate tariff replaced the country-specific IEEPA rates, including the 18% interim rate India had negotiated just two weeks earlier. Meanwhile, IT services, software exports, and the companies hiring engineering talent in India through Employer of Record arrangements continue to sit entirely outside the scope of every tariff instrument currently in play.
What the Data Shows
The timeline since February has been dense. The Supreme Court's 6-3 decision held that IEEPA does not grant the president authority to impose tariffs, which invalidated all IEEPA-based tariffs enacted since February 2025. The government estimated it collected $166 billion from more than 330,000 businesses in IEEPA tariffs that the Court found unconstitutional.
Unlike the IEEPA tariffs, the Section 122 tariff applies uniformly to all countries and does not incorporate country-specific product exceptions or the differentiated tariff rates previously negotiated in bilateral agreements. That means the India-specific 18% rate from the February 6 joint statement no longer has legal force. The same logic applies to deals structured as rate reductions: the rate being reduced no longer exists. India now faces the same 10% Section 122 surcharge as every other trading partner.
But Section 122 has hard limits. The statute authorizes temporary surcharges of up to 15% for a maximum of 150 days. The current surcharge took effect February 24, 2026, and expires July 24, 2026, unless Congress extends it. The administration has already signaled it wants higher, more durable tariffs. On February 21, President Trump announced he would raise the Section 122 rate to the statutory maximum of 15%.
The longer-term play is Section 301. On March 11, the USTR initiated Section 301 investigations into manufacturing overcapacity and structural trade practices targeting 16 economies including India, with public comments due April 15 and hearings scheduled for April 28. A day later, a second batch of Section 301 probes covering 60 economies was launched, this time focused on forced labor in trade. Trade experts expect the new Section 301 tariffs to be set at levels similar to the previously invalidated IEEPA rates, though they will take time to implement.
Through all of this, one thing hasn't changed. India's IT services sector exports software, not physical goods. The tariff applies to goods under the US Harmonized Tariff Schedule, not to services. TCS, Infosys, Wipro, HCL Tech, and other IT exporters are not subject to the tariff. The same structural exemption covers every company hiring engineers, data scientists, product managers, or AI developers in India. Services don't cross a border in a shipping container. They aren't classified under an HTS code. And no tariff instrument currently deployed, whether Section 122, Section 232, or a future Section 301 action, applies to them.
India's IT/BPM sector is projected to hit $315.4 billion in revenue in FY2026, according to Wisemonk's India Investment Intelligence 2026 report. The country's 5.95 million tech professionals, over 1,700 Global Capability Centers generating $64.6 billion in revenue, and 2.5 million annual STEM graduates all sit outside the tariff perimeter. That's not a loophole. It's the structural reality of how trade law classifies services versus goods.
What This Means
The practical effect of the SCOTUS ruling and the transition to Section 122 is paradoxical. Goods tariffs on India are currently lower (10%) than they were under the February interim deal (18%). But the uncertainty is higher, because Section 122 expires in July and nobody knows what replaces it.
The Section 301 investigations are widely viewed as a way to replace country-specific tariffs previously imposed using IEEPA, and new tariffs under Section 301 could come at similar levels. Goldman Sachs' Tim Moe noted that Section 301 requires a process including investigation and factual development, so it will take time to play out. For India, the Section 301 hearings scheduled for late April will be the first real test of whether the administration intends to impose India-specific duties that go beyond the flat Section 122 rate.
For companies making workforce and supply chain decisions, the goods tariff picture is the opposite of what anyone would call stable. In the past 14 months, India has faced tariff rates of 10%, 26%, 25%, 50%, 18%, 10%, and potentially 15%, with Section 301 rates yet to come. Every one of those changes affected goods importers. None of them affected companies hiring teams in India.
That contrast is sharpening a strategic shift that was already underway. When goods trade becomes unpredictable, companies redirect spend toward services and human capital, where the cost structure is stable and the trade policy risk is zero. India offers a 70-85% cost advantage at junior engineering levels and 50-65% at senior levels. Over 90% of the 1,700+ GCCs in India operate as multi-functional hubs spanning technology, product engineering, and AI/ML development. And with 120,000 AI/ML professionals working across 185+ dedicated centers of excellence, the talent depth for advanced technical roles is unmatched outside the US and China.
The bilateral trade framework announced in February hasn't disappeared politically, even though its IEEPA legal mechanism was voided. The September 2025 executive order authorizing the Secretary of Commerce and USTR to implement trade framework agreements was not rescinded, and the broader negotiating relationship remains intact. The White House stated it will continue to honor its legally binding Agreements on Reciprocal Trade and expects the same from its trading partners. The political will for a US-India deal exists. The legal vehicle is what's in flux.
What to Watch Next
The Section 122 tariffs expire July 24, 2026, unless Congress enacts legislation extending them past the 150-day statutory limitation. Whether Congress cooperates is an open question, and the legislative path for tariff authority is now a live political debate. If Section 122 lapses without a replacement, goods tariffs on India would temporarily fall to standard MFN rates plus any Section 232 duties on specific products like steel and aluminum.
The Section 301 investigation timelines are more concrete. Public comments close April 15, and hearings begin April 28. If USTR makes preliminary findings in Q3, that could lead to India-specific tariffs later in 2026, potentially at levels comparable to the original 26% IEEPA rate. How India is treated relative to other countries in the Section 301 process, particularly given the bilateral framework, will be telling.
Also watch for Congressional action on the IEEPA refund question. US customs is working on a system to process refunds of the $166 billion in IEEPA tariffs collected from over 330,000 businesses. The scale of potential refunds makes this a significant fiscal and political issue, and could influence how aggressively the administration pursues replacement tariffs.
For the US-India bilateral relationship specifically, the key question is whether the political framework from February can be re-implemented under Section 301 or another legal basis. If India can negotiate a preferential rate under a new statutory framework, the 18% interim rate could return in a different form. If it can't, India faces whatever country-specific rate the Section 301 process produces.
The one thing that doesn't require watching is the IT services exemption. It isn't a policy decision that can be reversed by executive order. It's a classification fact: services aren't goods. Whether tariffs on Indian goods land at 10%, 15%, 26%, or somewhere else entirely, the cost of hiring an AI engineer in Bengaluru, a product manager in Hyderabad, or a data scientist in Pune through an Employer of Record won't change by a single dollar. In a year where goods tariff policy has changed legal foundations twice and may change again before summer, that kind of structural stability is worth more than any trade deal.