Trump’s 25% Tariff Threat: How India’s Trade, Chabahar Port & Exports Are at Risk

Trump’s 25% Tariff on Iran’s Trade Partners

US President Donald Trump has announced a sweeping 25% tariff on any country that continues to do business with Iran, dramatically escalating pressure on Tehran amid widespread anti‑government protests and economic turmoil in the country. In a statement on Truth Social, Trump declared that “any country doing business with the Islamic Republic of Iran will pay a tariff of 25% on any and all business being done with the United States of America,” calling the order “final and conclusive”.

This move is aimed at deepening Iran’s economic isolation by making it prohibitively expensive for major trading partners like China, India, the UAE, Turkey, and others to maintain commercial ties with Tehran. For India, already facing a 50% US tariff on many goods (25% reciprocal duty plus 25% punitive duty over Russian oil purchases), the new Iran‑linked tariff could push the effective US duty on Indian exports to a staggering 75%.

India’s Trade with Iran: Size and Key Exports

India is among Iran’s top five trading partners, with bilateral trade standing at around USD 1.68 billion in FY2024–25 (April 2024 to March 2025). Of this, India exported goods worth about USD 1.24 billion, while imports from Iran were around USD 440 million.

Major Indian exports to Iran include:

• Basmati rice and other rice varieties

• Tea, sugar, and processed food items

• Pharmaceuticals and medical supplies

• Synthetic fibres, electrical machinery, and artificial jewellery

Iran has historically been one of the largest overseas markets for Indian basmati rice, making this sector particularly vulnerable to any disruption in trade. On the import side, India receives dried fruits (like dates and apples), inorganic and organic chemicals, methanol, petroleum bitumen, and glassware from Iran.

Why India Is in Trump’s Crosshairs

Although China is Iran’s biggest trading partner, India is directly in the firing line because of its long‑standing economic and strategic ties with Tehran. New Delhi has maintained trade and energy links with Iran even during periods of intense US sanctions, including continuing to export food, medicines, and industrial goods.

The timing of Trump’s announcement is significant: it came just hours after US Ambassador‑designate Sergio Gor described India as the “most essential partner” of the United States, highlighting a sharp contrast between diplomatic warmth and tough trade actions. Analysts see the 25% Iran tariff as another pressure tactic to push India into accepting US terms in the long‑pending bilateral trade deal.

India is already under a 50% US tariff on many goods, one of the highest rates globally, and a further 25% duty would make Indian exports to the US extremely uncompetitive. This layered tariff threat complicates India’s trade policy, forcing New Delhi to balance its economic interests with Iran against its strategic partnership with the US.

Impact on Indian Exporters and Sectors

The new tariff threat poses serious risks for Indian exporters, especially in agriculture and pharmaceuticals. Basmati rice exporters, who rely heavily on Iran as a key market, could see orders stall or shrink if Iranian buyers face higher costs or if Indian firms scale back operations to protect their US market access.

Pharma companies exporting generic medicines and APIs to Iran may also face headwinds, as US financial and trade restrictions could make payments and logistics more difficult. Additionally, exporters of tea, sugar, and processed foods could see reduced demand if Iran’s economic crisis deepens and its currency (rial) continues to depreciate.

Beyond direct trade, the threat of secondary sanctions and higher tariffs could deter global banks and insurers from handling Iran‑linked transactions, making it harder for Indian firms to finance and ship goods to Iran.

A key pillar of India–Iran ties is the Chabahar Port project in southeastern Iran, which India is developing as a strategic gateway to Afghanistan and Central Asia, bypassing Pakistan. India has signed a 10‑year agreement to operate the Shahid Beheshti terminal at Chabahar and has invested around USD 500 million in the project.

Chabahar is vital for India’s “Connect Central Asia” policy and serves as a counter to China’s Gwadar Port in Pakistan, which is part of the China–Pakistan Economic Corridor (CPEC). The port allows India to send humanitarian aid and trade goods to Afghanistan and Central Asian nations without relying on Pakistani routes.

However, the US has previously revoked sanctions waivers for Chabahar and now only offers a limited exemption that runs until April 2026. If the US decides to enforce its Iran sanctions more strictly, Indian companies involved in Chabahar could face restrictions in US markets, and global banks may avoid financing or insuring port operations.

India’s Diplomatic Tightrope in 2026

India now faces a classic diplomatic tightrope: maintaining its strategic and economic interests in Iran while avoiding a major rupture with the US. On one hand, Iran offers a land route to Afghanistan and Central Asia and remains a market for Indian goods; on the other, the US is a critical defence, technology, and trade partner.

New Delhi is expected to use the current sanctions waiver window (until April 2026) to strengthen regional ties, complete critical infrastructure at Chabahar, and diversify its trade and connectivity options. At the same time, India is actively engaged in trade talks with the US, with the next round of discussions scheduled for mid‑January 2026.

How India navigates this Iran–US trade squeeze will shape not only its bilateral relations with Washington but also its long‑term strategy in West Asia and Central Asia.