Trump’s Iran Tariff Puts India’s $1.2 Billion Exports Under Watch

US President Donald Trump’s decision to impose a 25 percent tariff on countries trading with Iran has sparked concerns about its impact on India’s exports to Tehran, currently valued at about $1.24 billion. Despite the uncertainty, India’s trade exposure remains limited, with its largest export, Rice which is unlikely to face immediate disruption.

India and Iran recorded bilateral trade of $1.7 billion in FY25, representing just 0.15 percent of India’s total trade. Indian exports accounted for $1.24 billion, while imports from Iran stood at $441.8 million, leaving India with a trade surplus of $799.3 million.

Rice continues to dominate India’s export basket to Iran. Shipments worth $757.3 million in FY25 accounted for over 61 percent of total exports, making rice the most significant category by value. However, food products such as rice fall under humanitarian supplies, which are generally exempt from US sanctions and penal tariffs.

Sanctions on Iran are enforced by the Office of Foreign Assets Control (OFAC) under the US Treasury Department. While OFAC rules can affect global trade due to the extensive use of the US dollar in international transactions, essential goods such as food and agricultural products are typically insulated from these restrictions.

Apart from rice, India exported oil meals worth $70.8 million, fruits and vegetables valued at $58.3 million, and other goods totalling $56.9 million in FY25. Exports of organic and inorganic chemicals stood at $56.5 million, followed by engineering goods at $43.3 million, pharmaceuticals at $40.7 million, tea worth $37.9 million, and spices amounting to $29.1 million.

Imports from Iran were relatively modest and declined by more than 29 percent year-on-year in FY25. These were mainly driven by organic chemicals and edible fruits and nuts such as dates, apples, and pistachios.

The tariff announcement comes at a time when several Indian exports already face high duties in the US market, with tariffs reaching up to 50 percent, including a 25 percent penal duty linked to India’s purchase of Russian crude oil. Even so, the latest move targeting Iran is expected to have a limited overall impact, given Iran’s small share in India’s global trade.

Trump’s announcement, made via social media without detailed legal documentation, forms part of a broader effort to increase economic pressure on Tehran amid rising domestic tensions. 

For India, while the situation warrants close monitoring, the dominance of humanitarian goods in its export mix suggests that trade flows, especially rice shipments are likely to remain largely unaffected in the near term.