India’s overall trade scenario is not likely to face much of an impact if it were to stop trading with Iran in response to U.S. President Donald Trump’s new threat of a 25% tariff on any country doing business with Iran, official data shows. However, it could temporarily impact some sectors such as rice, tea, fresh fruits, and essential oils, as per the data.

“Effective immediately, 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,” Mr. Trump posted on Truth Social early morning on January 13. “This Order is final and conclusive.”

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Mr. Trump’s actions are in reaction to the Iranian government’s apparent crackdown on protestors in that country.

India has a history of stopping or reducing trade with Iran in response to U.S. actions. India’s trade with Iran declined significantly after 2019, following the sanctions imposed on that country by the U.S. However, even prior to this, the overall trade levels had remained relatively small, with the two countries largely engaging with each other in a few sectors.

According to trade experts, if India were to stop trading with Iran, while some sectors might feel some short-term pain, Iran’s share is small enough that India will soon be able to find alternatives. 

Impact on India’s exports

An analysis by The Hindu of the latest trade data with the Ministry of Commerce and Industry shows that Iran accounted for 0.26% ($764.5 million) of India’s total exports in 2025-26 up to November 2025. This share has been falling pretty consistently since 2019-20, when Iran’s share in India’s exports was 1.1%.

To gauge the sectoral impact, it is important to look at the share of a sector in India’s exports to Iran, and the share of Iran in India’s total exports of that sector. If both values are high, the impact on that sector is likely to be high.

Of India’s exports to Iran, a whopping 61% ($756 million) in 2025-26 so far was basmati rice. If India were to stop exporting to Iran in response to the U.S. tariff threats, this is a sector that could face some pain as basmati rice exports to Iran made up 13.1% of India’s total basmati rice exports this year.

The other sectors that might feel an impact are tea, with Iran making up 5.6% of India’s tea exports, essential oils (5.4%), and fresh fruits (5.3%). Each of these sectors are among the top-5 exports of India to Iran.

Impact on India’s imports

Just as Iran has played a small and declining role in India’s exports, its share in India’s imports has similarly been shrinking. 

Iran’s share in India’s total imports stood at a relatively small 2.7% in 2016-17, which shrank sharply after 2019 and is now 0.04% as of November 2025. 

Sectorally, the data shows that India’s imports from Iran are currently dominated by two sectors — petroleum products (46.6% share) and fresh fruits (39.8% share). 

Of these, the fresh fruits sector might feel some short-term supply issues as Iran accounts for 4% of India’s total fresh fruit imports. However, this impact is likely to be limited in terms of scope and time.

Iran used to be a relatively significant source of crude oil for India, accounting for nearly 7% of India’s total crude oil imports in 2012-13. However, the situation is very different now, with official data showing that India has not imported crude oil from Iran since 2019-20. 

The lesson India should learn from U.S. President Donald Trump’s latest tariffs on Chinese goods is that no deal with the U.S. is final and that India should focus on building self-reliance while continuing to balance its relations with the Western as well as BRICS economies, according to former Director General of Foreign Trade Ajay Srivastava.

Mr. Trump on October 10 announced a 100% tariff on Chinese goods starting November 1, 2025, raising the overall tariff rate on Chinese imports to roughly 130%. The U.S. move came in response to Beijing’s October 9 decision to impose new controls on rare earth exports.

Under the new Chinese rules, any product containing more than 0.1% China-origin rare earths or produced using Chinese refining or magnet-making technology would require the Chinese government’s approval before it is exported. China controls more than 70% of the global rare-earth refining capacity.

“For India, the message is clear: no deal with the U.S. is ever final,” Mr. Srivastava, also the founder of the Global Trade Research Initiative (GTRI) said in a note. “The much-publicised U.S.-China “Phase One” trade deal of 2025, which capped U.S. tariffs at 30% and China’s at 10%, has already been overtaken by the new 100% duty order.”

He added that India must negotiate carefully and on equal terms for its own trade deal with the U.S. 

“Rather than relying on shifting U.S. promises, New Delhi should focus on building self-reliance in critical technologies and minerals, insulating its economy from future trade shocks while leveraging its neutral position to strengthen ties with both Western and BRICS economies,” Mr. Srivastava added.

India’s negotiations with the U.S. have recently gone through considerable upheaval. The latest formal round of negotiations towards a Bilateral Trade Agreement was to have taken place in August. However, it was indefinitely postponed in light of the cumulative 50% tariffs the US that month imposed on Indian imports. 

Since then, attempts to thaw relations have been made, with Commerce Minister Piyush Goyal visiting the U.S. in late September to meet U.S. Trade Representative Jamieson Greer. However, the next date of formal negotiations are yet to be announced.

The government is with the micro, small and medium enterprises (MSME) of the country, an official of the MSME assured the assembled representatives of such firms on Tuesday (September 9, 2025), in reference to global headwinds that have triggered supply chain disruptions.

“It is important to understand that the government is not going anywhere,” Joint Secretary in the Union Ministry of Micro, Small and Medium Enterprises (MSME) Ateesh Kumar Singh said speaking at an event organised by the PHDCCI. “Please have the confidence, give us some time, [and] things would be working.”

Mr. Singh added that the headwinds would be tackled “very firmly, diligently and deftly”.  

The Joint Secretary pointing to the earlier disruptions triggered during the COVID-19 pandemic, and emphasised that “we [the government] withstood the pressures, understood the risks and tried to find solutions around it”. He added that the government stood “solidly and firmly” behind the MSMEs. 

Absorbing profits “not a sustainable solution” 

Mr. Singh, referring to internal documents being prepared to assess the prevailing tariff situation, noted that several companies have incorporated tariffs into their profit margin so that the landing cost remains the same.

“That may be there but that is not a sustainable solution, we need to do more,” he stated. He also said the government has taken note of production shifting or trading rerouting taking place through Nepal and Sri Lanka.

The Joint Secretary noted in his address that such headwinds would keep coming “[every] now and then”.

“So, we need to have that kind of strategy available with us so that we have one template on how to deal with certain such disruptions,” he emphasised, stating the ministry was working towards the same. 

Need for diversifying exports 

Speaking at the same event, Rajan Sudesh Ratna, Deputy Head and Senior Economic Affairs Officer, United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) emphasised that it was now time to utilise the current free trade agreements (FTAs) to their full potential. The officer noted that currently the utilisation was “less than 10%”. 

Separately, Mr. Ratna also emphasised the need for export diversification, and the need to access markets that could be the other big importers of the products that are currently facing high U.S. tariffs.

“There is a need to look at markets which are top importers of the product,” he said. Although taking note of assertions about the process taking time, Mr. Ratna emphasised, “What option do we have?”. 

Referring to the present situation, he pointed to the tariffs imposed by the U.S. in April as compared to those currently in place. “You must look at the credibility of the partner, if a country like U.S. does not respect its 30-year-old agreement with Mexico and Canada, you are in a false belief that your new friendship will take you to the new world order,” he said.  

The Government has come up with an “action plan” to respond to the tariff escalation by the U.S., which includes short-, medium-, and long-term measures aimed at not only addressing the short-term pain points, but also increasing long-term competitiveness, the spokesperson of the Ministry of Commerce and Industry told The Hindu. 

According to sources, the short-term measures include providing immediate liquidity and compliance relief to exporters and helping them maintain order levels and employment in vulnerable sectors. 

“The Government of India is proactively responding with a timely, well-calibrated, and comprehensive multi-tiered strategy designed not only to safeguard Indian exporters but also to strengthen our long-term competitiveness in global markets,” the spokesperson said.

“The Department of Commerce has framed a short-medium, and long-term action plan to respond to this tariff escalation,” they added.

“Action plan” to respond to U.S. tariff

According to sources in the Ministry, this action plan is based on a few “guiding principles”: providing immediate relief to exporters with regard to liquidity, compliances, and order levels, building resilience in supply chains, leveraging existing trade agreements, and providing other non-financial assistance to exporters. 

“It is anticipated that exporters may face delayed payments, stretched receivable cycles, and cancelled orders due to the tariff shock,” the source explained. “To prevent working capital stress and protect employment, the government is considering several steps to ease liquidity, prevent insolvencies, and allow exporters to sustain operations until new markets are tapped.”

Major concern for exporters

The Hindu has learnt from various export promotion bodies that the liquidity crunch is a major concern for exporters as they have already bought the stock that they would have exported to the U.S. under normal circumstances. 

“A critical risk is a drop in order levels, particularly in SEZ-based units which contribute significantly to labour-intensive exports,” the source in the Ministry explained. 

They confirmed The Hindu’s August 13 report about the government tweaking the Export Promotion Mission (EPM), announced in the Union Budget 2025, to better align it with the needs of the currently affected export sectors.

That plan is currently being appraised by the Expenditure Finance Committee (EFC). It will include ‘Niryat Protsahan’ or helping exporters with trade finance access such as interest subvention, e-commerce export cards, and collateral support. 

The second pillar would be ‘Niryat Disha’, which would help exporters with market access through export compliance support, branding and packaging support, logistics and warehousing assistance, trade intelligence, and skilling. 

The government is also considering some SEZ policy flexibility norms to help SEZs to sustain production volumes and scale.

The overall plan also includes increasing the resilience of supply chains to prevent future shocks, either in terms of demand or in supply, through measures such as setting up e-commerce export hubs with simplified return logistics, and easier inter-state movement and GST refunds. 

The medium- and long-term strategy includes leveraging the existing Free Trade Agreements that India has signed, an export diversification push so that large shares of exports don’t go to any single country, establishing strategic autonomy is crucial sectors, and creating digital trade infrastructure in the form of the BharatTradeNet (BTN). 

The BTN is envisaged to establish a unified and paperless digital public infrastructure for trade, which can ensure legal recognition of electronic trade documents and digital identities in line with the norms laid out by the United Nations Commission on International Trade Law.

A U.S. federal appeals court ruled Friday (August 29, 2025) that most of President Donald Trump’s tariffs, impacting numerous trading partners, were illegal — but allowed them to remain in place for now.

The 7-4 ruling by the U.S. Court of Appeals for the Federal Circuit affirmed a lower court’s decision finding that Mr. Trump had exceeded his authority in tapping emergency economic powers to impose wide-ranging duties.

But the judges allowed the tariffs to stay in place through mid-October, allowing the parties to take the case to the Supreme Court.

The decision marks a blow to the President, who has wielded duties as a wide-ranging economic policy tool.

This could raise doubt over deals Mr. Trump has struck with major trading partners like the European Union.

Since returning to the presidency in January, Mr. Trump has invoked the International Emergency Economic Powers Act (IEEPA) to impose tariffs on almost all U.S. trading partners, with a 10% baseline level and higher rates for dozens of economies.

Friday’s (August 29, 2025) ruling noted that “the statute bestows significant authority on the President to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax.”

The U.S. Court of International Trade ruled in May that Mr. Trump had overstepped his authority with across-the-board global levies.

Benchmark equity indices Sensex and Nifty declined in early trade on Thursday (August 7, 2025) as U.S. President Donald Trump slapped an additional 25% duty — doubling it to 50% — on Indian goods over New Delhi’s continued imports of Russian oil.

The move that is likely to hit sectors such as textiles, marine and leather exports hard was slammed by India as “unfair, unjustified and unreasonable”. With this action singling out New Delhi for the Russian oil imports, India will attract the highest U.S. tariff of 50% along with Brazil.

The 30-share BSE Sensex dropped 335.71 points to 80,208.28 in early trade. The 50-share NSE Nifty declined 114.15 points to 24,460.05.

From the Sensex firms, Adani Ports, Tata Motors, Kotak Mahindra Bank, Eternal, Tata Steel and NTPC were among the laggards.

However, Trent, Titan, Sun Pharma and ITC were among the gainers.

In Asian markets, South Korea’s Kospi, Japan’s Nikkei 225 index, Shanghai’s SSE Composite index and Hong Kong’s Hang Seng were quoted in positive territory.

The U.S. markets ended higher on Wednesday (August 6, 2025).

Foreign Institutional Investors (FIIs) offloaded equities worth ₹4,999.10 crore on Wednesday (August 6, 2025), according to exchange data.

Global oil benchmark Brent crude jumped 1% to $67.56 a barrel.

On Wednesday (August 6, 2025), the 30-share BSE Sensex fell 166.26 points or 0.21%, to settle at 80,543.99. The Nifty dipped 75.35 points or 0.31% to close at 24,574.20.