India may face fallout from US 25% tariff on Iran trade partners

Though largely routed via UAE, India's basmati rice and tea exports may come under pressure

The United States (US) will impose a 25 per cent tariff on any country doing business with Iran, “effective immediately”, in response to anti-regime protests in the West Asian nation, American President Donald Trump has announced.

 

“Effective immediately, any country doing business with the Islamic Republic of Iran will pay a tariff of 25 per cent on any and all business being done with the United States of America. This Order is final and conclusive…,” said Trump in a post on Truth Social. An executive order from the White House detailing implementation was still awaited.

 

India’s key trade partners, including China, Türkiye and the United Arab Emirates (UAE), are expected to be among the worst affected once the order is enforced. The Ministry of External Affairs and the Department of Commerce are closely monitoring developments. The exact impact will become clear only after the executive order is issued, a government official said.

 

The US already imposes a 50 per cent tariff on about 55 per cent of India’s exports. If India continues trade with Iran, an additional 25 per cent levy would raise the effective tariff incidence to 75 per cent.

 

India’s trade volumes with Iran, however, remain limited, standing at $1.68 billion in FY25. Exports to Iran were valued at $1.24 billion, accounting for 0.28 per cent of India’s export basket. Key products included cereals, animal fodder, tea and coffee, spices, fruits and vegetables, and pharmaceuticals. Imports from Iran were valued at about $442 million, or 0.06 per cent of India’s total imports.

 

“The trade with Iran is outside the sanctions imposed by the US, given the humanitarian nature of most of these products. An additional 25 per cent tariff imposed by the US on any country doing business with Iran will have almost no impact on India,” said the Federation of Indian Export Organisations (FIEO) in a statement. The exporters’ body, however, warned of a larger impact on Iran’s currency, already at historic lows, which could weaken further and affect both Iranian exports and imports.

 

Some exporters remain concerned, given Iran’s importance as a market for basmati rice and high-quality tea. Basmati exporters said the ongoing unrest in Iran has pushed shipments to a near standstill, leading to a sharp fall in mandi prices. Tea exporters have sought clarification from the Union Ministry of Commerce on the proposed levy. 

 

Rice exports

 

The Indian Rice Exporters Federation (IREF) said the crisis has disrupted payment cycles, delayed shipments and dented buyer confidence in domestic mandis. Market participants said prices of key basmati varieties have fallen by ₹5-10 per kg over the past week.

 

Akshay Gupta, head of bulk exports at KRBL, one of India’s largest basmati exporters, said sanctions and tighter market restrictions have already weighed on business. “Today, our current exposure to the Iran market is limited at around $8-10 million and is being managed prudently. Considering the limited trade to Iran, we have been doing the majority of our trade through the UAE, where Iranian importers operate locally. This arrangement has helped us mitigate risks. The re-imposition of US tariffs, including the proposed 25 per cent levy under the Trump framework, adds an additional challenge to the Indian basmati rice sector,” Gupta said.

 

India exported basmati rice worth $468.10 million to Iran during April-November, amounting to nearly 599,000 tonnes, according to IREF. “Iran has historically been a pillar market for Indian basmati. However, the current internal turmoil has disrupted trade channels, slowed payments and dented buyer confidence,” said Prem Garg, national president of IREF. “The immediate fallout is evident in Indian mandis, where basmati prices have softened sharply within days. Exporters must exercise heightened caution, particularly with respect to credit exposure and shipment timelines.”

 

IREF has advised exporters to reassess risks linked to Iranian contracts, adopt more secure payment mechanisms and avoid overleveraging inventories for the Iran market. It has also called for diversification toward alternative markets in West Asia, Africa and Europe to cushion the impact of any prolonged slowdown.

 

During April-November of FY26, India exported more than 240,000 tonnes of rice to the US, valued at $233.83 million. That’s compared to exports of 335,000 tonnes worth $391.74 million in FY25 and 118,000 tonnes worth $145.86 million in FY24.

 

The federation expressed deeper concern over developments in Iran, where importers have flagged difficulties in honouring commitments and remitting payments. While similar disruptions have occurred before, the current situation remains unpredictable and could further unsettle prices, liquidity and trade sentiment in the coming weeks.

 

Key tea market

 

Anshuman Kanoria, chairman of the Indian Tea Exporters Association, said exporters have sought clarity from the government. “No details have been provided in the US statement. We have requested the Ministry of Commerce for an update as soon as more information is available,” he said.

 

Iran is the largest market for India’s orthodox teas, accounting for about 40-50 mn kg, though much of the trade is routed through the UAE.

 

Industry data shows that during April–November 2025, Indian tea exports to Iran rose to 10.69 mn kg from 8.32 mn kg a year earlier. Exports to the UAE stood at 45.66 mn kg during the same period.

 

Even as exporters await clarity on the tariff, payment disruptions are already emerging. “We are worried about the current situation in Iran. Payments of some of our exporters are also stuck,” an exporter said.

 

Shrimp and dairy

 

Shrimp exporters are concerned about the potential fallout in the US market. While dairy exports are relatively small, value-added products such as milk powder and ghee are expected to be hit.

 

The proposed US tariff on countries trading with Iran poses a serious risk to India’s agri-export ecosystem, particularly shrimp and dairy, said Divya Kumar Gulati, chairman of the Compound Livestock Feed Manufacturers Association (CLFMA) of India.

 

The US is India’s largest and most valuable shrimp market, and an additional tariff on top of existing anti-dumping and countervailing duties would significantly erode price competitiveness against suppliers such as Ecuador, Vietnam and Indonesia. This could trigger order diversions, squeeze exporter margins and lead to job losses across the value chain, Gulati said. 

Govt expects no major India impact 

Government sources on Tuesday said that the 25 per cent tariff announced by the United States on trade partners of Iran is likely to have minimal impact on India. For India, Iran does not even figure in the top 50 global trading partners, they said. Last year, India’s total trade with Iran was $1.6 billion, which is approximately 0.15 per cent of India's total trade, they pointed out. “India’s trade value with Iran is expected to further go down in the current financial year given external economic factors,” sources said. Iran’s total imports were about $68 billion in 2024 of which its leading import partners were the United Arab Emirates , with $21 billion, that is 30 per cent of Iran’s trade, with China it was $17 billion, that is 26 per cent, with Turkiye $11 billion, or 16 per cent.