The already strained trade relationship between India and the United States has entered a more turbulent phase following US President Donald Trump’s latest tariff announcement, which threatens to significantly impact Indian exports. The new measure — an additional 25 per cent tariff on countries conducting business with Iran — has pushed the cumulative tariff burden on Indian goods entering the US market to an unprecedented 75 per cent. Reacting sharply to the development, senior Congress leader and Member of Parliament Shashi Tharoor described the situation as “serious” and “troubling,” warning that such high duties could effectively shut Indian exporters out of the American market.

Trump’s announcement, made earlier this week, is part of Washington’s renewed hardline stance against Iran, aimed at isolating Tehran economically by penalising its trading partners. For India, which maintains limited but strategic engagements with Iran, particularly in the energy and infrastructure sectors, the move has far-reaching consequences. The latest 25 per cent tariff comes on top of existing duties imposed by the US in recent months, including a 25 per cent tariff linked to India’s continued purchase of Russian oil and another 25 per cent levied earlier as part of broader trade disputes.

Taken together, these measures mean that Indian exports to the US now face tariffs totalling 75 per cent — a level that Tharoor argues is commercially unsustainable.

Speaking to reporters on Wednesday, Tharoor laid out the arithmetic behind his concern. “You already have an initial 25 per cent tariff imposed on India, which itself was higher than what many of our South Asian competitors face,” he said. “Then you add 25 per cent more for Russian sanctions, which takes the total to 50 per cent. Now, with another 25 per cent linked to Iranian sanctions, it goes up to 75 per cent. Let’s face it, no Indian company can be viable exporting to America at 75 per cent tariffs.”

Tharoor stressed that the impact would be particularly severe for labour-intensive sectors where India competes directly with other South Asian economies. Industries such as gems and jewellery, marine products, shrimp, leather goods and other low-margin exports are likely to be hit hardest. These sectors rely heavily on price competitiveness, and a tariff differential of this magnitude could see Indian exporters lose market share to countries facing far lower duties.

He pointed out that even the initial 25 per cent tariff placed India at a disadvantage compared to its regional competitors. “Our neighbours exporting similar labour-intensive products are not facing the same level of punitive tariffs,” Tharoor said. “That already skewed the playing field. Now, with these additional sanctions-related tariffs, the situation becomes untenable.”

According to Tharoor, the list of Indian goods that could continue to find buyers in the US under such conditions would be extremely limited. “At 75 per cent tariffs, the only items that might still be exported are those not yet sanctioned or those where India has a near-monopoly or strategic importance,” he said, citing pharmaceuticals as a possible exception. India is a major supplier of generic medicines to the US, and certain critical drugs may remain in demand despite higher costs.

“Beyond that, it is hard to see how most Indian exporters can survive in the American market,” he added. “This is why I find the situation deeply troubling.”

The Congress MP also urged greater diplomatic engagement to prevent further deterioration in ties between the two countries. In particular, he called on the newly appointed US ambassador to India to play an active role in reviving stalled trade negotiations. “There needs to be serious, sustained effort from both sides to arrive at a mutually acceptable trade deal,” Tharoor said. “Without that, we are looking at long-term damage to one of India’s most important economic relationships.”

While Tharoor’s remarks reflect opposition concerns, they come at a time when the Indian government is already engaged in high-level diplomatic efforts to manage the fallout. On Tuesday, External Affairs Minister S Jaishankar held a phone conversation with US Secretary of State Marco Rubio, amid growing uncertainty over the future of India–US trade ties.

Describing the exchange as productive, Jaishankar said the two leaders discussed a range of issues, including bilateral cooperation in trade, nuclear energy and defence. “Had a good conversation with Secretary Rubio,” Jaishankar said in a brief statement. “We discussed bilateral cooperation across several sectors and will remain in touch on these and other issues.”

The call is being seen as part of New Delhi’s attempt to keep communication channels open at a time when relations are experiencing sharp ups and downs. While strategic and defence ties between India and the US remain strong, economic relations have been under strain due to disagreements over tariffs, sanctions and market access.

Adding to the complexity of the situation is a recent political controversy sparked by comments from US Commerce Secretary Howard Lutnick. Appearing on a podcast, Lutnick claimed that a bilateral trade deal between India and the US could not be finalised last year because Prime Minister Narendra Modi did not call President Trump to personally close the agreement.

According to Lutnick, India had been given “three Fridays” to clinch the deal, during which a phone call from Modi to Trump was allegedly expected as a signal of political commitment. His remarks triggered a strong response from New Delhi, with the Ministry of External Affairs (MEA) firmly rejecting this characterisation.

MEA spokesperson Randhir Jaiswal, speaking at the ministry’s weekly media briefing, said Lutnick’s claims were inaccurate and misleading. “The characterisation of these discussions in the reported remarks is not accurate,” Jaiswal stated. He emphasised that India remains interested in a mutually beneficial trade agreement and is committed to continuing negotiations in good faith.

Jaiswal also sought to counter the narrative that there had been a lack of communication at the highest political level. He noted that Prime Minister Modi and President Trump had spoken on the phone on at least eight occasions throughout 2025, discussing a wide range of issues related to the India–US partnership. “There has been no shortage of engagement between the two leaders,” he said, underscoring that talks had covered trade as well as strategic, security and geopolitical matters.

Despite these reassurances, the imposition of steep tariffs has heightened concerns within India’s political and business circles. Exporters are increasingly anxious about losing access to the US market, which remains one of India’s largest trading partners. Economists warn that prolonged tariff escalation could not only hurt exports but also disrupt supply chains, affect employment in export-oriented industries and weaken investor confidence.

For now, much depends on whether ongoing diplomatic engagement can translate into concrete progress on a trade deal that addresses US concerns while safeguarding India’s economic interests. As Tharoor and others have warned, the cost of failure could be high. With tariffs at levels rarely seen between strategic partners, the stakes for both countries have seldom been greater.