Minimal risk for India from Trump's 25 per cent Iran-linked tariffs: Govt sources

US President Donald Trump’s announcement of a 25 per cent tariff on any country doing business with Iran has raised debate over India’s trade and foreign policy strategy, even as officials stress that immediate impact on Indian trade will be limited. The move comes amid violent protests in Iran.

Former Indian diplomat Kanwal Sibal criticised Trump’s tariff policy on social media , highlighting its potential to disrupt the flow of humanitarian goods - a large part of India’s exports to Iran and warning against “tariff mania.” Sibal wrote: “India exported $1.25 billion worth of goods to Iran under non‑sanctioned humanitarian category. Does Trump want to stop the flow of humanitarian goods, too? Contribute to a humanitarian disaster in Iran?”

Trump said the US would act decisively against countries trading with Tehran. “Effective immediately, any country doing business with the Islamic Republic of Iran will pay a tariff of 25 per cent on any and all business being done with the United States of America. This Order is final and conclusive,” he tweeted. Indian officials noted that no formal legal notification or enforcement details have yet been issued.

Historically, India’s engagement with Iran aimed to counterbalance Pakistan’s influence in the region , even though both countries are Muslim-majority nations. Former Prime Minister Nehru’s vision emphasized building ties with Muslim-majority countries as part of a broader policy of non-alignment and regional cooperation.

Today, India’s trade with Iran is limited. Bilateral trade stood at USD 1.6-1.7 billion in 2024‑25 , a tiny fraction of total trade. India stopped importing Iranian crude in May 2019, during Trump’s first term , following US sanctions. Exports include basmati rice, cereals, pharmaceuticals, tea, spices, sugar, oilseeds, textiles, machinery and essential oils , while imports are mainly dry fruits, chemicals, fertilizers, plastics, glassware and minerals . Crude oil imports remain negligible.

Trade bodies like the Federation of Indian Export Organisations (FIEO) have said Indian industry and banks already comply with US sanctions and that most exports to Iran are humanitarian, noting “no basis to anticipate any major adverse impact on India.”

Strategic projects, particularly the Chabahar port , could face uncertainty. India and Iran have a 10-year development agreement for the terminal, vital for connectivity to Afghanistan and Central Asia. Temporary exemptions of 6 months from US sanctions granted in October 2024 could be reviewed if tensions escalate.

While India’s exposure is limited, China , Iran’s largest trading partner, condemned the US tariff, saying it “firmly opposes any illicit unilateral sanctions and long-arm jurisdiction” and warning that “tariff wars have no winners.” The UAE , Iran’s biggest import partner, could also see trade disruptions.

Experts argue India must rethink its strategic trade posture , balancing historical regional strategies, humanitarian commitments, and economic interests, and consider a more independent, principled stance in global trade and foreign policy.