Why US rates just slowed down

In today’s Finshots, we tell you why US rates just slowed down a lot and what that means for the next phase.

The Story

Last year, tariffs moved into the world as higher prices often do. There was no single moment when everything changed. Goods became a little more expensive, negotiations a little more difficult and decisions a little more cautious. Before long, everyone behaved as if this was simply how things were going to be. Not just India, but every major economy – from China and the European Union to the United Kingdom and Australia.

The rates were wide and applied across countries. That scale forced companies and governments to react as if the rules really had changed forever.

For India in particular, the stakes were high. The US is one of India’s largest trading partners, with annual goods trade crossing $120 billion in 2024, and key export sectors exposed to tariff risk. India was also among the countries facing higher reciprocal duties, making the hit felt immediately and structurally. Until very recently, we were on the verge of signing our own trade agreement with the US. And the alternative to not having one was to be exposed to a ridiculous highlight 500% rate.

As a result, countries began to accelerate trade negotiations with the US and with each other. All this was just to hedge against what appeared to be a prolonged phase of US protectionism. Supply chains have been adjusted. Investment plans have been reworked. The assumption was simple: rates were here to stay.

That assumption suddenly broke last week when the US Supreme Court ruled that the tariffs imposed by the president were illegal.

That single judgment did not just undo a set of duties. It called into question something far more fundamental—whether tariffs could be imposed quickly and kept indefinitely without Congressional approval.

Here’s why. When the tariffs took effect last year, governments and companies worked around them without much protest, more focused on what to do next. But almost no one stopped to ask a basic question first – was it legal?

You see, the tariffs were imposed by President Trump using a law called the International Emergency Economic Powers Act (IEEPA). It is a law intended for true national emergencies. What now constitutes an emergency are things like threats to national security, state-sponsored terrorism, and foreign government aggression.

But what doesn’t count as an ’emergency’ per se are trade deficits, general economic imbalances and of course tariffs.

The difference is exactly what the US Supreme Court pointed out.

In its 6-3 decision last week, six justices agreed that the tariffs were illegal, while three dissented. It said that emergency powers cannot be used as a shortcut to pursue long-term trade policy. Tariffs are not a short-term fix – they change how businesses plan for years. The court’s opinion was that emergency powers were not intended to be used in this way.

But this judgment did not say that tariffs could not be imposed at all. It just said it could not be enforced this way (by the IEEPA). The ruling also came at an awkward economic moment. With American growth slowed down, doing nothing wasn’t really an option – even if the fastest legal route had just been closed.

That one distinction led to what came next. The White House complied and removed the previous tariffs it had imposed, but it in turn took a different route.

They did this by imposing a temporary import surchargelimited to 150 days, using a narrower trade law designed for short-term balance of payments stress. The surcharge was applied across all countries and later increased from 10% to 15%. It might be called a surcharge, but to global trade it looks and feels like a tariff – just one with an expiration date.

So what does this mean now and what does the future look like?

For starters, the rates haven’t completely disappeared. They just changed shape. They are now more temporary, more legally fragile, and harder to sustain without support from Congress. But the repercussions are what could make it a case study for future generations.

Let’s start with the importers who actually paid the tariffs in the first place.

They are already preparing to dispute the duties they have already paid. And even if it’s not that long, the US Treasury could be looking at an eye-sore $175 billion of refunds from 3 lakh businesses.

This is not the first time the US government has had to pay back companies. Back in 1998when another import-related tax was partially abolished, approximately $730 million was eventually refunded—a process that took nearly two years to complete.

The tax in question was the Harbor Maintenance Tax, enacted by Congress in 1986 and calculated as a charge on the value of cargo moving through US ports. The Supreme Court later ruled that applying the tax to exports was unconstitutional, forcing the government to roll it back and issue refunds.

At the current scale and size, it could be years before businesses actually start seeing paybacks. When asked about the refunds, Trump himself said they would end up being in court for five years.

Meanwhile, any effort to keep tariffs in place will have to go through slower channels — formal investigations, national security reviews or Congress itself.

More importantly, the ruling shifts the balance of power. Previously, tariffs were first introduced and later questioned. That order has now reversed. Speed ​​no longer guarantees durability. Any tariff announced overnight is much more likely to be temporary, challenged in court or reversed unless it survives a longer political and legal process. Because the US Supreme Court has literally declared that only Congress has the power to levy taxes and duties under the constitution.

Already the EUChina and other major countries have stepped forward and are rethinking past agreements. The EU has made it clear that it will not accept any tariff increase from the US, given how they already signed a trade deal last year. Beijing said it was conducting a “full assessment” of both the Supreme Court ruling and the new temporary tariffs.

But India’s response stands out for what it did not do.

Rather than rush to finalize or rewrite trade commitments, India has stoppedreconsidered and waited. Officials are studying how the Supreme Court and temporary ruling rates affect earlier assumptions baked into negotiations.

The Supreme Court ruling does not close the chapter on US tariffs. This opens up a more complex one. For countries watching closely, including India, this moment calls for patience rather than urgency. With trade policy still up in the air, decisions taken too quickly could become obsolete faster than the tariffs themselves.

So nothing about this moment feels finished yet. Rates are still in place, numbers are still shifting, and negotiations are still unfinished. But the idea that trade policy can be quickly imposed and treated as permanent has been gently disrupted.

Until then…

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