Trump’s Tariff Attack: 25% duty on countries doing business with Iran, what will be the impact on India’s economy?

India-Iran Relation: US President Donald Trump has adopted a new strategy to put pressure on Iran. He announced that any country doing business with Iran would have to pay an additional 25 percent tariff on trade with the US. This decision is effective with immediate effect and Trump termed it ‘final and decisive’. The move comes amid ongoing massive protests in Iran, where the government is being accused of repression. This move by Trump is similar to the policy adopted against Russia, where he had imposed similar penalties on countries purchasing Russian oil.

“Effective immediately, any country doing business with the Islamic Republic of Iran will pay a 25% tariff on any business with the United States,” Trump wrote on his social media platform Truth Social. This decision may affect countries like China, United Arab Emirates, Türkiye and India, which are major trading partners of Iran.

What will be the impact on India?

India is an important trading partner of Iran, so this tariff may increase pressure on New Delhi. Currently the US tariff on India is 50% (Basic 25% + 25% for Russian oil purchases). If the new 25% tariffs tied to Iran go into effect, the total tariffs could reach 75%. Due to this, Indian exports may become expensive in America, trade may decrease and the burden on the economy may increase. However, the decision remains unclear, and India-Iran trade is already hit by US sanctions – falling from $17 billion in 2018-19 to $1.68 billion in 2024-25.

India got $0.80 billion trade surplus from Iran, but companies may be risk averse from the new tariffs. India often trades through third countries, so the direct impact may remain limited, but costs will increase.

India-Iran trade

India and Iran have strong cooperation on energy, agriculture, medicines and chemicals. The Chabahar Port Project is strategically important, providing access to Afghanistan and Central Asia. India signed a 10-year agreement here in 2024. However, it may be affected by political instability and tariffs.

FY 2024-25 Trade Data Amount ($Billion)

Total bilateral trade 1.68
Exports from India 1.24
Import from Iran 0.44
Surplus (in favor of India) 0.80

What does India import from Iran?

– Acyclic alcohol derivatives ($309 million)
– Petroleum gas ($126 million)
– petroleum coke
– Apple, dry dates, almonds
– Inorganic/Organic chemicals, glass products

What does India export to Iran?

– Basmati rice (big market for farmers of Punjab-Haryana, 12 lakh tonnes annually)
– Soybean meal, banana
– Tea, sugar, fresh fruits
– Medicines, soft drinks, meat, pulses

Remembrance of Russia’s policy

Trump had imposed ‘secondary tariffs’ on countries buying oil from Russia in 2025. On India it was increased from 25% to 50%. There were direct sanctions on Russia, but they targeted allies. Trump threatened 100% tariffs in July 2025, affecting the global oil market. The same strategy is on Iran, which will challenge India-Iran relations. India may have to find alternative markets, but projects like Chabahar will continue.

Overall, Trump’s decision will impact global trade, especially for China, but India can proceed with caution.