US President Donald Trump’s latest threat to impose a 25% tariff on countries that continue to do business with Iran is expected to have only a limited impact on India, given the sharp decline in bilateral trade between New Delhi and Tehran over the past several years, officials and people familiar with the matter said on Tuesday.

Trump announced that the tariff would become “effective immediately,” linking the move to Iran’s violent crackdown on widespread protests that have erupted across Tehran and other major cities in recent days. The protests, according to reports, have resulted in hundreds of deaths, intensifying international scrutiny and pressure on the Iranian government.

“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. This Order is final and conclusive,” Trump said in a post on social media, underlining the punitive nature of the measure.

While the statement was forceful, officials noted that there is still a lack of clarity on whether the United States has formally begun implementing the tariff in the absence of an official notification or detailed guidelines. Nevertheless, the announcement has raised concerns among several of Iran’s trade partners about potential economic fallout.

In India’s case, however, the direct impact is expected to be marginal. Trade between India and Iran is currently valued at less than $2 billion, a fraction of India’s overall global trade. During the 2024–25 financial year, bilateral trade stood at around $1.68 billion, accounting for roughly 0.15% of India’s total trade volume. Imports from Iran amounted to just $0.44 billion, underscoring how limited the commercial relationship has become.

“Iran does not figure among India’s top 50 trading partners anymore,” one official familiar with the assessment said. “Even if the tariff were to be strictly enforced against India, the overall economic impact would be minimal.”

Officials also pointed out that India’s trade with Iran is expected to decline further in the current financial year due to a combination of external economic factors, persistent sanctions, and limited payment mechanisms. Indian banks, wary of secondary sanctions and exposure to Western financial systems, have significantly reduced their involvement in transactions linked to Iran.

If implemented against India, Trump’s proposed 25% tariff would add to the already steep duties imposed by the US in recent months. India is currently facing tariffs of up to 50% on certain exports to the US, including a 25% punitive levy linked to its purchases of Russian energy. Even so, the Iran-linked tariff is not expected to materially alter India’s trade calculus, given the small base involved.

The contrast with earlier years is stark. Iran was once a major energy supplier to India, and crude oil formed the backbone of bilateral trade. In 2018–19, two-way trade between the two countries stood at $17.03 billion. However, this relationship changed dramatically after India stopped importing Iranian oil in May 2019, following the reimposition of US sanctions during Trump’s first term as president.

The decision to halt oil imports caused bilateral trade to collapse almost overnight. Since then, trade has remained at subdued levels, consisting largely of limited imports of chemicals, fertilisers, and agricultural products, alongside modest Indian exports.

Officials contrasted India’s relatively low exposure with Iran’s trade ties with several other countries, many of which continue to maintain significant economic relationships with Tehran despite Western sanctions. Iran’s total imports in 2024 were estimated at nearly $68 billion. Its leading import partners included the United Arab Emirates, China, Turkiye, Iraq, and the European Union.

The UAE alone accounted for about $21 billion, or 30%, of Iran’s imports, while China’s share stood at roughly $17 billion, or 26%. Turkiye accounted for around $11 billion, or 16%, and the European Union collectively contributed about $6 billion, or 9%. These figures highlight how countries with deeper trade links to Iran could face far greater exposure if the US moves decisively to enforce the new tariff regime.

India’s limited exposure is also the result of cautious policy choices over the past several years. Indian banks and financial institutions have largely disengaged from Iran-related transactions due to concerns about secondary sanctions and the potential impact on their global operations. This has constrained trade even in sectors that are not directly targeted by sanctions.

Despite the overall decline in economic ties, India continues to maintain a strategic presence in Iran through the Chabahar port project, which New Delhi views as critical for regional connectivity and access to Afghanistan and Central Asia. In May 2024, India and Iran concluded a 10-year agreement for the development and operation of a terminal at the Chabahar port on the Gulf of Oman.

Recognising the strategic importance of the port, the Trump administration granted a six-month exemption from US sanctions applicable to Chabahar in October 2024. The exemption was seen in New Delhi as an acknowledgment of the port’s role in facilitating humanitarian aid and regional trade, and officials remain hopeful that this carve-out will continue despite the latest hardline rhetoric from Washington.

Analysts note that Trump’s latest tariff threat is as much a political signal as an economic one. By linking trade penalties to Iran’s internal crackdown on protesters, the US administration is attempting to increase international pressure on Tehran at a moment of heightened domestic unrest. However, the effectiveness of such measures will depend heavily on how rigorously they are enforced and whether key trading partners comply.

For India, the immediate priority remains managing the broader trade relationship with the United States, which has been under strain due to tariff disputes and disagreements over energy and strategic autonomy. In that context, the Iran-related tariff is viewed as a secondary concern rather than a central challenge.

“From India’s perspective, the bigger issue is resolving the existing trade tensions with the US,” an official said. “Iran-related trade is already minimal and carefully calibrated.”

While the situation remains fluid and subject to further clarification from Washington, the consensus in New Delhi is that Trump’s new tariff threat, though rhetorically sharp, is unlikely to significantly disrupt India’s economy or foreign policy choices. Instead, its greatest impact may be felt by countries with far deeper commercial and financial ties to Tehran.

As the US weighs its next steps and Iran continues to grapple with domestic unrest, India appears relatively insulated from the immediate economic consequences of the latest escalation, even as it closely watches developments that could reshape the broader geopolitical and trade landscape.