Global investors, including those in India, are holding their breath for a crucial decision from the United States Supreme Court. The ruling on the legality of former President Donald Trump's tariff policies is poised to send significant ripples through financial markets worldwide. For Indian equities, which have already faced pressure, the verdict could be a major turning point.
Market Turbulence and the Tariff Overhang
Indian benchmarks, the Sensex and Nifty, have witnessed a sharp decline of over 2% in the past five trading sessions. This slump is attributed to a combination of factors: a stalemate in India-US trade talks, renewed threats of higher tariffs from Donald Trump, and a concerning new legislative proposal in the US Senate. This bill, which Trump has endorsed, seeks to impose a staggering 500% tariff on countries that purchase Russian crude oil—a move that directly threatens India's energy imports and trade competitiveness.
While market participants anticipated a ruling from the US Supreme Court on Friday, no decision was announced, extending the period of uncertainty. Investors are now speculating whether the impending judgment will catalyze a sharp recovery in the indices or worsen the existing turbulence that has unsettled Dalal Street.
Potential Scenarios: Market Rally vs. Prolonged Volatility
Experts outline two starkly different outcomes based on the Supreme Court's decision. A ruling that strikes down the Trump-era tariffs as illegal could provide immediate and substantial support to global risk assets.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, explains the potential global fallout: "If the ruling is that the tariffs are illegal and the president has exceeded his authority, that will lead to serious consequences like refunding the importers who have paid the tariffs. This will widen the US deficit and increase their borrowing, leading to higher bond yields. The impact of this scenario on the US stock market will be negative."
However, for India, such a verdict could be highly beneficial. "Countries like India which have been at the receiving end of Trump’s tariffs will benefit from such a ruling. Particularly exporters to the US will benefit," Dr. Vijayakumar added. Analysts believe this would lower input costs, ease trade tensions, and improve profit visibility for export-driven sectors currently burdened by high US duties, potentially triggering a market rally.
Conversely, if the court upholds the tariffs, markets should brace for prolonged volatility and heightened policy uncertainty. Sustained high tariffs would keep supply chain costs elevated, squeeze corporate margins, and likely delay investment decisions. In this scenario, experts anticipate a lack of broad market momentum, with trading activity confined mostly to specific stocks.
The Looming Threat of 500% Tariffs
Beyond the existing tariff regime, market participants are acutely aware of the new threat posed by the proposed Russia Sanctioning Act. Harsimran Sahni, Head of Treasury at Anand Rathi Global Finance, highlighted the escalation: "The trade dispute between India and the US has intensified, with former President Donald Trump endorsing legislation... that would allow a 500% tariff on countries importing Russian oil."
Since the Ukraine conflict began, India has ramped up imports of discounted Russian crude. Sahni warned that enforcing such a tariff could sharply increase the cost of Indian exports to the US, damaging trade competitiveness and straining the fragile global economy. The implications extend beyond trade, potentially slowing growth in export sectors and complicating inflation management through higher energy costs, which could affect liquidity and drive yields higher.
As the world watches, the US Supreme Court's decision—whether a full invalidation or a partial nullification—will be parsed for its specific details. The ruling will not only define the immediate legal landscape but also set the tone for future trade relations and economic policy, with Indian markets positioned as a key beneficiary or casualty of the outcome.
