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14 January 2026|The Hindu
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International RelationsEconomyNEWS

Trump's Iran Tariff Threat: Limited Impact on India's Trade

India's trade with Iran is minimal; Trump's tariffs unlikely to significantly affect India.

Background Context

The relationship between India and Iran has ancient roots, dating back to the Indus Valley Civilization. Cultural and trade ties flourished for centuries, with Persian influences evident in Indian art, architecture, and language. In the modern era, India and Iran maintained cordial relations, particularly during the Cold War, despite differing political alignments. The 1979 Iranian Revolution brought about a shift, but economic cooperation, especially in energy, remained a key aspect of the relationship. India's dependence on Iranian oil imports has been a significant factor shaping its foreign policy towards Iran, often requiring a delicate balancing act between its strategic interests and international pressures, particularly from the United States.

India's trade with Iran is not expected to be significantly impacted by U.S. President Donald Trump's threat of a 25% tariff on countries doing business with Iran. India's trade with Iran has already declined since 2019 due to previous U.S. sanctions. In FY26 (up to November 2025), Iran accounted for only 0.26% ($764.5 million) of India's total exports, a decrease from 1.1% in FY20. Key exports to Iran include basmati rice (61% of exports), tea, essential oils, and fresh fruits. While some sectors may experience short-term challenges, experts believe India can find alternative markets. The Federation of Indian Export Organisations (FIEO) suggests that most Indian exports to Iran are humanitarian and may not be subject to the tariffs.

Key Facts

1

India's exports to Iran (FY26): 0.26% ($764.5 million)

2

Basmati rice share: 61% of India's exports to Iran

3

Iran's share in India's total imports: 0.04% (Nov 2025)

Latest Developments

In recent years, India has been navigating a complex geopolitical landscape concerning its relationship with Iran. The development of the Chabahar Port project, intended to provide India with access to Afghanistan and Central Asia bypassing Pakistan, has been a significant focus. While the U.S. has provided waivers for this project due to its strategic importance for Afghanistan's reconstruction, the overall environment of sanctions has created challenges. India has also been exploring alternative payment mechanisms, such as rupee-rial trade, to circumvent the impact of sanctions. The future trajectory of India-Iran relations will likely depend on the evolving dynamics of U.S.-Iran relations and India's ability to balance its strategic and economic interests.

3 Key Concepts to Understand

This article covers important concepts like International Trade, Sanctions and 1 more. Understanding these will help you answer exam questions better.

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