President Donald Trump's January 12, 2026, announcement of 25% tariffs on all US trade with countries doing business with Iran poses significant risks for India, a key Iranian partner. The policy takes effect immediately, and is aimed at countries such as India during the crack down of protesters by Tehran that may impose added tariffs on Indian products by the US.
Trade Exposure
The bilateral trade between India and Iran was 2.33 billion in FY24 with India exporting 1.45 billion (rice, tea, pharmaceuticals) to it and importing oil/petrochemicals despite the sanctions. The blanket tariff covers all US-India trade (120B+ exports), which doubles previous 2550 percent taxes on Russian oil purchases, potential to 75 percent actual rates on apparel, gems, pharmaceuticals and IT services.
Strategic Impacts
Chabahar Port, the 370M investment by India to serve Central Asia seems to be under new doubts even after US waivers in the past, tariffs would ensure the money or the operation ceases. The diversification of energy is hurt since Iran can be a long-term oil supplier, although there was a decline to almost zero imports after 2019.
Potential Responses
India can take exemptions through diplomacy, export/market diversification, or hasten rupee-rial collections. Analysts do expect short term export hits (1-2% GDP drag) but long term supply chain shifts; markets fell by 0.5% on announcement.
