The US Supreme Court is preparing to deliver a landmark verdict on tariffs imposed under emergency powers, a decision that could trigger one of the largest tariff refund exercises in US history with over $133.50 billion potentially at stake. The ruling carries significant implications for Indian markets and exporters who have been subjected to some of the steepest US tariffs globally.

Current Tariff Impact on Indian Exports

Indian exporters currently face substantial trade barriers in the US market, with tariff rates creating significant challenges across multiple sectors.

These tariffs have increased costs for Indian exporters across sectors including engineering goods, chemicals, auto components, textiles, and pharmaceuticals, directly impacting margins and competitiveness in the US market. The duties were imposed under the International Emergency Economic Powers Act (IEEPA) of 1977, starting February 2025, covering fentanyl-related duties, reciprocal tariffs, and country-specific punitive measures.

Legal Challenge and Court Proceedings

The tariffs face significant legal challenges that have progressed through multiple court levels. Lower courts have consistently ruled against the tariff authority, with the US Court of International Trade determining that IEEPA does not grant explicit presidential authority to levy broad-based import tariffs, as taxation powers rest with Congress. The US Court of Appeals for the Federal Circuit later affirmed this position, agreeing that the IEEPA-based tariffs were unlawful and exceeded executive authority.

However, the appellate court stayed the impact of its ruling, allowing the tariffs to remain in force temporarily while the matter moved to the Supreme Court. The Supreme Court conducted oral arguments in November, with a decision expected as early as this Friday.

Refund Mechanism and Scale

The US Customs and Border Protection (CBP) has prepared for potential massive refund operations by implementing significant procedural changes.

CBP has introduced a fully electronic refund system through the ACE portal, requiring importers to register for ACH payments by February 6. After this date, CBP will discontinue paper checks, as handling refunds on such a large scale would not be feasible manually.

Market Impact Scenarios

The Supreme Court decision presents two distinct scenarios with different implications for Indian markets. If the Court strikes down the IEEPA-based tariffs, Indian markets could experience significant positive momentum. Relief from existing 50% tariffs, reduced probability of 500% secondary tariffs, and improved export visibility would likely boost market sentiment, with export-oriented sectors potentially seeing strong buying interest.

Conversely, if the Court upholds presidential tariff authority under IEEPA, Indian markets could face immediate pressure. Existing tariffs would remain in force, and the administration's leverage to implement extreme measures like 500% tariffs would strengthen, potentially creating selling pressure in export-heavy stocks.

Sector Focus and Implications

Regardless of the Supreme Court's decision, market attention is expected to concentrate on export-oriented sectors with high US market exposure.

Key Affected Sectors:

• IT services
• Pharmaceuticals
• Specialty chemicals
• Auto components
• Engineering goods
• Textiles
• Metals
• Gems and jewellery

The Sanctioning Russia Act of 2025, introduced by US Senators Lindsey Graham and Richard Blumenthal with presidential backing, proposes secondary tariffs up to 500% on countries continuing Russian oil purchases. According to trade experts, such tariffs would effectively eliminate India's exports to the US, jeopardising trade exceeding $120.00 billion annually, given that China and India are the largest buyers of Russian crude.

The US Supreme Court is scheduled to issue rulings today, with market participants closely watching for a potential decision on Trump's controversial tariffs against US trade partners. January 9 has been designated as an "opinion day" by the court, marking the first opportunity for a ruling on the tariff dispute. The Supreme Court typically releases decisions around 10:00 a.m. Eastern Time on opinion days, though the court does not announce in advance which specific rulings it intends to issue.

Trump Tariff Background and Legal Challenge

On April 2, Trump imposed sweeping tariffs ranging from 10-50% on trade partners, designating the date as "Liberation Day". These tariffs faced immediate legal challenges, with lower federal courts ruling that many exceeded presidential authority under existing laws. The courts determined that the statute used by the Trump administration does not explicitly empower a president to impose broad import duties, a power traditionally reserved for Congress under the US Constitution.

Supreme Court Deliberation

The Supreme Court will determine whether Trump can invoke the International Emergency Economic Powers Act (IEEPA) to impose tariffs without Congressional approval. Arguments presented on November 5 indicated that the 6-3 conservative majority expressed "deep concerns" over the Trump administration's use of federal law to impose these tariffs. The ruling carries significant implications for US fiscal health and trade policies, potentially representing Trump's biggest legal setback in his second presidential term.

Potential Impact on Indian Stock Market

Market experts anticipate a strong possibility of the Court ruling against Trump, which could positively impact Indian stock markets. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, stated there is "a high probability of the verdict going against Trump," noting that the market reaction would depend on specific details of the ruling.

"If the Supreme Court declares Trump tariffs illegal, there would be a rally in India since India has been the worst affected by the 50% tariffs," Vijayakumar explained. He emphasized that the significance lies in whether the Court would partially strike down the tariffs or completely declare them illegal.

Vijayakumar highlighted a key argument against the tariffs: the emergency provisions were used to address widening trade deficits that have persisted for over 15 years. "A problem which has been hanging fire for 15 years cannot be addressed using the emergency powers," he noted, calling this "a valid argument" against the tariff implementation.

Congressional Alternative and Russia Sanctions

Even if the Court rules against Trump's tariffs, relief may be temporary as the President retains the option to seek Congressional approval for the tariffs. The situation has gained additional complexity with Trump's renewed focus on Russian oil importers. On January 7, Republican Senator Lindsey Graham announced that Trump had backed a Russia sanctions bill, potentially raising US tariffs to at least 500% on countries purchasing Russian oil.

Gold and Silver Market Implications

The uncertainty surrounding the Supreme Court decision is expected to impact precious metals markets. Anuj Gupta, a SEBI-registered analyst, identified key technical levels for both gold and silver markets amid the ongoing volatility.

Gupta noted that increased uncertainty typically benefits gold and silver, though both metals are expected to remain volatile due to geopolitical developments, dollar movements, and bond market fluctuations. The Supreme Court's decision today could significantly influence these technical levels and overall market sentiment in the precious metals sector.