The 15% Reset: Understanding the New US Tariffs on India

The global trade landscape has just shifted once again, and for India, the waves are hitting home. In a dramatic turn of events in February 2026, the United States trade policy underwent a massive “reset” that has every Indian exporter and policymaker on high alert. For months, Indian businesses had been navigating a complex maze of high duties, but a recent US Supreme Court ruling followed by a swift executive response from President Donald Trump has changed the game.

The result? A new, uniform 15% global tariff framework. For many, this feels like a breather after the crushing 50% duties seen in late 2025, but for others, it’s a new hurdle in an already unstable market. In this blog, we will break down what these US tariffs on India actually mean, why the legal battle in Washington matters to a small business in Ludhiana or a tech giant in Bengaluru, and what the future looks like for India-US trade.

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From 50% to a 15% “Reset” – A Recap

To understand where we stand today, we have to first go back to the roller-coaster year of 2025. Trade relations between India and the US have been tense, characterized by a “tit-for-tat” approach.

Last year, the US administration used the International Emergency Economic Powers Act (IEEPA) to impose what they called “reciprocal tariffs.” There were times when due to India’s continued purchase of Russian oil and other trade imbalances, the total tariff burden on certain Indian goods peaked to an alarming 50%. This made Indian products like textiles, leather, and steel way too expensive for American buyers.

However, on February 20, 2026, the US Supreme Court delivered a landmark ruling. It decided that the President did not have the authority to use emergency powers to impose such sweeping global tariffs without the consent of the US Congress. This effectively canceled the old 50% and 25% rates.But the “reset” didn’t stop there. Within 24 hours of the court’s decision, President Trump invoked a different law – Section 122 of the Trade Act of 1974. He initially announced a 10% global tariff, which he quickly raised to 15% the very next day. This brings us to the current situation: a flat 15% baseline duty on almost all goods entering the US, including those from India.

What Does “Section 122” Mean for India?

The use of Section 122 is a strategic move. This law allows the US President to impose temporary import restrictions (up to 150 days) to deal with “large and serious” balance-of-payments deficits.

For the Indian audience, here is the simple version:

1. It’s Temporary: These US tariffs on India are legally bound to a 150-day window. After that, the US Congress must decide whether to extend them.
2. It’s Universal: Unlike the previous “reciprocal” tariffs that targeted India specifically for its trade policies, this 15% is being applied to almost every country.
3. It Overrides Previous Deals: Earlier this month, India and the US were close to an “Interim Trade Deal” that would have set tariffs at 18%. Since the new global rate is 15%, that deal has been put on hold while both sides rethink the math.

Sector-Wise Impact: Who Wins and Who Loses?

The US tariffs on India don’t affect every industry in the same way. The impact depends on how much of a “necessity” the product is for the US economy and whether it falls under specific exemptions.

1. The Protected Giants: Pharma and IT

The good news is that the US still relies heavily on India for critical supplies. To protect their own supply chains, the US has exempted certain sectors from these broad tariffs:

• Pharmaceuticals: India provides nearly 45-50% of the generic drugs used in the US. This sector remains largely shielded.
• Electronics and Semiconductors: As the US tries to move its supply chains away from China, Indian electronics are seen as a strategic alternative and are mostly exempt.
• IT Services: Since the 15% tariff applies to physical goods (merchandise), India’s massive IT export industry remains unaffected by this specific move.

2. The Worst Hit: Textiles, Leather, and Gems

For the traditional manufacturing sectors, the 15% reset is a double-edged sword. While 15% is much better than the 50% seen last year, it is still a “surcharge” that sits on top of existing duties.

• Textiles & Apparel: Small and Medium Enterprises (SMEs) in India are struggling. They now face a 15% duty plus the standard “Most Favoured Nation” (MFN) rates thus making it tough to compete with countries like Vietnam or Bangladesh.
• Gems & Jewellery: This high-value sector has seen a decline in turnover as American consumers pull back on luxury spending due to higher prices.
• Marine Products & Chemicals: These sectors are seeing their profit margins squeezed as they try to keep prices stable for US buyers while paying higher taxes at the border.

Sector Deep-Dive: Auto Components and Agriculture

The “15% Reset” is not a one-size-fits-all policy. While it provides relief from the earlier 50% peak, it introduces new challenges for India’s high-growth sectors.

1. Auto Components: Caught in the “National Security” Crossfire

India’s auto component industry is a global powerhouse, but the US market is its biggest test.

• The Tariff Layering: While the new global surcharge is 15%, many auto parts are still subject to “Section 232” tariffs. These are national security-based duties (often 25%) that were not struck down by the court.
• The Cost War: Indian exporters of gears, brakes, and electrical parts now face a complex calculation. A 15% surcharge on top of existing duties makes them more expensive than competitors in Mexico (who are largely exempt under the USMCA trade deal). For the Indian small-scale manufacturer, this means thinner margins and a desperate need for the Indian government to secure a “Sectoral Exception.”

2. Agriculture: The “Necessity” Shield

For India’s farmers and food processors, the news is a mix of relief and fresh anxiety.

• Exempted Staples: To keep inflation low for American families, the US has exempted certain “essential” agricultural items from the 15% surcharge. This includes fresh vegetables, beef, and tropical fruits.
• The Processed Hit: However, value-added products like processed shrimp, honey, and spice extracts are not as lucky. These items, which are huge export earners for India, now face the 15% levy.
• The Trade-Off: As part of the ongoing trade talks, the US is pushing India to allow more American almonds, walnuts, and soybean oil into the Indian market at zero duty. This has caused concern among local Indian farmers who fear being undercut by cheap US imports.

Why India “Hit the Brakes” on the Trade Deal

You might have heard in the news that India postponed its high-level trade talks in Washington scheduled for late February. This was a “strategic pause.”

Indian negotiators, led by the Commerce Ministry, realized that the “base price” of trade had changed. If the US is now charging a flat 15% to everyone, India’s previous concessions (like opening up its dairy or medical device markets) might be too “expensive” to give away. India is now waiting to see if these US tariffs on India will actually last beyond the 150-day limit or if the US Congress will strike them down.

Expert Opinion on Trump’s 15% Tariff impact

The street expectation is that the US will apply different legal provisions so that the tariffs will remain almost unchanged, says Nilesh Shah, MD of Kotak Mahindra AMC. He also added that any change will be for the short term and thus will not probably impact market direction materially.

Samir Arora, fund manager and founder of Helios Capital is of the opinion that as far as India is concerned there is nothing wrong with 15%. He also asked a counter question about how it is going to matter in a major way when all countries have a 15% or 10% tariff.

Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities opines that the introduction of a uniform rate across countries also gets rid of the relative disadvantage due to the differential trade arrangements with the US. He went on to say that in the case of India, he expects the effective tariff burden to be eased from 25%.

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Key Takeaways for the Indian Audience

• The 15% is a Baseline: It is a global surcharge. If a product already had a 5% duty, the new effective duty becomes 20% (15% + 5%).
• Legal Uncertainty: The new tariffs are likely to be challenged in US courts again and this means that businesses should prepare for more price fluctuations over the next year.
• Opportunity in Chaos: Because these tariffs apply to everyone, India remains more competitive than China, which faces even higher specific duties (often over 50%).
• Strategic Patience: The Indian government is not rushing into a deal. They are waiting for a stable “new normal” before signing long-term agreements.

The current state of US tariffs on India is a reminder that global trade is no longer just about buying and selling – it’s about legal battles and political leverage. For the Indian exporter, the mantra for 2026 is: “Stay flexible, diversify your markets, and keep an eye on Washington.”