The decision comes amid heightened tensions with Tehran. Trump has repeatedly warned of possible military action against Iran, accusing the regime of violent repression of protesters. The White House later confirmed that military options, including air strikes, are under active consideration, underscoring a harder US stance toward Iran and its economic partners.

While the administration has not specified what constitutes “doing business” with Iran, the announcement has triggered uncertainty across global markets. It is also unclear whether the tariff would apply only to goods or extend to services, investments, and indirect trade routed through third countries.

India is among the five largest trading partners of Iran, alongside China, Iraq, the United Arab Emirates, and Turkey. For New Delhi, the announcement raises immediate concerns. India already faces a 25% US tariff on certain exports, along with an additional 25% levy linked to its continued purchases of Russian oil. If the new Iran-related tariff is applied to Indian goods, total duties on some exports could rise to as much as 75%.

Bilateral trade between India and Iran stood at $2.33 billion in 2022–23, marking a year-on-year increase of nearly 22%. India’s exports—worth $1.66 billion—include basmati rice, tea, sugar, pharmaceuticals, fruits, pulses, and meat products. Imports from Iran, valued at $672 million, comprise methanol, petroleum bitumen, liquefied propane, chemicals, and dry fruits. Trade volumes dipped in early 2023–24, reflecting the broader impact of sanctions and payment challenges.

A key strategic element of India-Iran ties is the Chabahar Port project, which New Delhi views as vital for regional connectivity and humanitarian access to Afghanistan and Central Asia. India has maintained support for the project despite US sanctions, complicating its position amid Washington’s latest move.

China, Iran’s largest trading partner, could also face sharper costs. Analysts estimate the new tariff could push effective US duties on Chinese goods to at least 45%, rekindling trade war fears. Last year’s US-China tariff escalation had rattled global markets.

Trade experts warn that the lack of clarity around enforcement could strain diplomatic ties and disrupt supply chains. For India, the challenge will be balancing strategic autonomy, energy security, and trade relations with Washington as the policy fallout unfolds.