New York – Global markets reacted positively on Friday, February 20, 2026, to a landmark ruling by the U.S. Supreme Court that struck down sweeping tariffs imposed by former President Donald Trump. The decision, which invalidated the use of the 1977 International Emergency Economic Powers Act (IEEPA) to justify broad-based tariffs, sent ripples through international trade and spurred a rally in equity markets, including a significant surge in India’s Gift Nifty.
The Gift Nifty, an early indicator of Indian equity market trends, jumped nearly 400 points from its lows on Friday, signaling a strong opening for Indian stocks. This increase reflects investor optimism stemming from the reduced uncertainty surrounding global trade policies. The ruling effectively dismantles the legal basis for tariffs that had been a central component of Trump’s economic agenda, particularly during his second term.
The “Liberation Day” Tariffs and Their Impact
In April of last year, Trump initiated what he termed “Liberation Day” tariffs, imposing a baseline duty of 10% on all imports into the United States. These were supplemented by country-specific tariffs ranging from 15% to 50%. While some of these tariffs were later renegotiated or reduced, the overarching framework remained in place, creating significant disruption and volatility in global supply chains.
The administration had projected that these tariffs would generate trillions of dollars in revenue over the next decade. However, the measures also triggered a global trade war, strained relationships with key trading partners, and contributed to increased uncertainty in financial markets. The legal challenge to these tariffs centered on whether IEEPA, originally intended for national crises, could be used to justify broad trade restrictions.
Supreme Court Ruling and Dissent
The Supreme Court’s 6-3 decision determined that IEEPA does not authorize the imposition of tariffs. Justices Clarence Thomas, Samuel A. Alito Jr., and Brett Kavanaugh dissented. Justice Kavanaugh, in his dissenting opinion, specifically referenced the duties imposed on India over its purchases of Russian oil. The U.S. Had previously announced 25% reciprocal tariffs on India, alongside an additional 25% punitive levy linked to those energy imports.
The punitive 25% duty on Indian goods related to Russian oil purchases was withdrawn after Washington stated that New Delhi had committed to halting direct or indirect imports of Russian oil and increasing purchases of American energy. However, the broader tariff structure remained a point of contention until the Supreme Court’s ruling.
Implications for Global Trade and India
The ruling is widely seen as a potential reset for global trade tensions. Wall Street’s main indices rallied on Friday following the announcement, indicating investor confidence in a more stable trade environment. The decision has significant implications for export-oriented economies and multinational corporations that had adjusted their supply chains to account for the tariff regime.
For India, the timing of the ruling is particularly noteworthy, as the country’s broader markets have been experiencing volatility due to uncertainty surrounding Federal Reserve policy and a slump in IT stocks. Earlier this month, India and the United States reached an interim trade understanding aimed at easing tariff tensions. Under this agreement, the U.S. Agreed to lower reciprocal tariffs on Indian goods to 18%, while India committed to reducing certain tariffs and non-tariff barriers on American imports.
This interim agreement had already provided some relief to Indian markets, which had faced sustained pressure amid global trade uncertainties. The Supreme Court’s decision further alleviates those pressures by removing the legal foundation for the broader tariff framework. However, it remains unclear how the U.S. Administration will respond and whether new trade measures could be introduced under different legal provisions.
Looking Ahead
The dismantling of the Trump-era tariff structure represents a significant shift in global trade dynamics. While the immediate impact is positive, with markets reacting favorably, the long-term consequences will depend on the U.S. Administration’s future trade policies. The ruling underscores the importance of international cooperation and adherence to established trade rules. The potential for renewed trade tensions remains, but the Supreme Court’s decision has created an opportunity for a more stable and predictable global trade environment.
The ruling’s impact extends beyond direct trade flows. It also affects investment decisions, supply chain strategies, and overall economic growth. Companies that had previously factored tariffs into their cost structures will now need to reassess their strategies, potentially leading to increased investment and expansion. The removal of trade barriers is expected to boost global economic activity and foster greater international collaboration.
