Chinese goods remain subject to levies under Section 301 of the US' 1974 Trade Act
[SINGAPORE/NEW DELHI] New openings have been created for two of Asia's largest economies, China and India, in their trade talks with Washington now that the sweeping tariffs imposed by President Donald Trump in 2025 have been struck down by the US Supreme Court.
Trump swiftly replaced them with a new 10 per cent global tariff rate that he said would rise to 15 per cent.
Amid a cloud of uncertainty kicked up by the Supreme Court's ruling on Feb 20 that he was not authorised to use emergency economic powers to impose his so-called Liberation Day tariffs, Beijing and New Delhi have both signalle d that they are recalculating their next moves.
The headline tariff rate is only one factor in negotiations, said analysts, as geopolitics, energy security, domestic concerns and potentially lucrative investment deals will all weigh on talks between the two Asian powers and the Trump administration.
Still, the fallout from the Supreme Court verdict has prompted the Indian government to push back ongoing trade talks with the US that were expected to leave India facing a tariff rate higher than the current 10 per cent global baseline.
An Indian trade delegation's visit to Washington this week to finalise an interim trade deal announced earlier this month has been rescheduled, with New Delhi saying that it is "studying all developments and implications".
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China, meanwhile, has urged the US to abandon its "unilateral tariffs" and said it is willing to conduct "candid consultations" during the next round of bilateral trade negotiations ahead of a visit to China by Trump from Mar 31 to Apr 2.
China's Ministry of Commerce also suggested on Feb 24 that it may "adjust" the countermeasures it had imposed in response to Trump's original levies, noting that the US has suspended reciprocal and fentanyl-related tariffs on China amounting to 24 per cent after the Supreme Court verdict.
Trump's new 10 per cent global tariff will lower the effective tax rate levied on Chinese exports to the US by 6.9 percentage points, according to an analysis by Maybank IBG Research.
The effective tariff rate reflects the average tariff paid across all imported Chinese goods, accounting for the share of China's exports to the US, as well as any exemptions and product-specific tariffs.
Maybank's analysis also found that the effective tariff rate on Indian exports to the US will fall by 3.9 percentage points with Trump's new levy.
Even with a 15 per cent global tariff, which the White House is now working to f ormally impose, the effective US tariff on Chinese and Indian goods will still be lower than before the Supreme Court ruling.
Beyond the figures, Dan Wang, China director at consultancy Eurasia Group, said the US court ruling is tactically favourable for Beijing. By limiting Trump's ability to deploy tariffs at will, it eases pressure on China to increase soya bean purchases from US farmers or loosen control on rare earth exports.
But she does not foresee a fundamental shift in US-China ties.
"The measures with real structural impact are non-tariff tools, including US export controls on advanced chips," the analyst told The Straits Times.
"Meanwhile, US signalling and actions on Taiwan, the South China Sea, and security ties with Japan and South Korea carry greater strategic weight, and the initiative in these areas still rests largely with Trump," she said.
The issue of Taiwan came into sharper focus recently after Washington approved its largest arms sale to the self-governing island, over which Beijing claims sovereignty.
Deborah Elms, head of trade policy at the Hinrich Foundation in Singapore, said the new US tariff rate is good news for Chinese exporters.
But Chinese goods such as electric vehicles remain subject to tariffs under Section 301 of the US ' 1974 Trade Act, which is aimed at addressing unfair trade practices.
Trump has warned he will carry out more investigations under this statute and use others like Section 232 of the 1962 Trade Expansion Act. Both do not impose a cap on the tariffs that can be imposed.
Elms said that once a country gets named as an unfair trade actor under Section 301, there are all manner of possible punishments and there is no need to relaunch a new investigation to impose new tariffs on China under the law.
"What appears to be stopping him has been a desire to avoid escalation pending his visit to Beijing," she added.
Guo Shan, a partner at Shanghai-based consultancy Hutong Research, also expects stable US-China ties given Trump's pending visit to Beijing.
She said the main development to watch for is what agreements can be reached between Trump and Chinese President Xi Jinping, and whether these can be maintained after the US midterm election in November.
"It seems possible that China could purchase some US energy or purchase agricultural products in exchange for tariff exemptions, or provide some rare earth elements in exchange for aircraft engines," Guo added.
In India, Trump's new global tariff regime represents a marginal win for Indian exporters, who were othe rwise contending with a higher 18 per cent overall reciprocal tariff under the yet-to-be-finalised bilateral trade deal with the US.
They will now get relief, at least for the next 150 days until Jul 24, when an extension of the new tariff rate will require approval from the US Congress.
On the flip side, the new levy could see India losing any edge over competitors such as Vietnam, which had faced higher reciprocal tariffs of around 20 per cent.
Ajay Sahai, director-general and CEO of the Federation of Indian Export Organisations, told ST that the new US global tariff places Indian exporters on an even footing with those from other countries, compared with the earlier regime of wider- ranging reciprocal tariffs.
"It is a good development for Indian exports and I feel it provides some certainty, at least for 150 days."
Sahai said India's focus should now be on negotiating with the US from "a position of greater strength" and bringing down Most-Favoured-Nation (MFN) tariffs – the baseline duties that apply to Indian imports into the US before any additional special tariffs.
Indian leather footwear, for instance, faces an 8 per cent MFN tariff. "But if this becomes zero, we will just pay 15 per cent, and other competitors will pay 23 per cent. So, we will have an upper edge over others," added Sahai.
Experts also said the US court verdict weakens Trump's position and gives India more elbow room in negotiations.
Biswajit Dhar, a development economist and former professor at the Jawaharlal Nehru University, told ST that India should not rush into any deal with the US at this stage.
Instead, it should use this opportunity to push for a better agreement and address widespread concerns around reported concessions in the interim agreement, such as opening up India to US agricultural exports as well as stopping the purchase of cheap Russian oil in favour of American and Venezuelan energy imports.
Dhar said: "We cannot give in to US dict ates or agree to their sanctions regime." THE STRAITS TIMES
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