Trump's New Tariff Policy: What It Means for India and Iran's Trade Relations
Impact of Trump's Tariff Announcement
New York/Washington: President Donald Trump has declared that any nation engaging in trade with Iran will incur a 25% tariff on their transactions with the United States. This decision could significantly affect Iran's key trading allies, including India, China, and the UAE.
In a post shared on Truth Social, Trump stated, "Effective immediately, any country doing business with the Islamic Republic of Iran will pay a tariff of 25% on all business conducted with the United States. This order is final and conclusive."
Countries like China, Turkey, India, the UAE, Pakistan, and Armenia are among Iran's primary trading partners.
This tariff announcement poses a potential challenge for India, which has consistently ranked among Iran's top five trade partners in recent years.
The United States has already imposed a 50% tariff on India, one of the highest globally, which includes a 25% tariff on India's purchases of Russian energy.
As per the Indian Embassy in Tehran, India exports various goods to Iran, such as rice, tea, sugar, pharmaceuticals, manmade staple fibers, electrical machinery, and artificial jewelry. Conversely, India imports dry fruits, inorganic and organic chemicals, and glassware from Iran.
Data from the Observatory of Economic Complexity (OEC) indicates that in 2023, India's exports to Iran reached $1.19 billion, while imports amounted to $1.02 billion.
The leading exports from India to Iran this year included rice ($734 million), soybean meal ($96.8 million), and bananas ($52 million). In contrast, Iran's top exports to India featured acyclic alcohol derivatives ($309 million).
The Indian Embassy in Tehran emphasized the long-standing historical ties between India and Iran, stating, "India and Iran share a millennia-long history of interactions. The contemporary relationship draws upon the strength of these historical and civilizational ties and continues to grow, marked by high-level exchanges, commercial cooperation, and cultural ties."
A significant aspect of the India-Iran relationship is the collaborative development of the Chabahar port. Situated in Iran's Sistan-Balochistan province along the energy-rich southern coast, this port is being developed to enhance connectivity and trade.
In May 2015, India and Iran formalized their partnership through a Memorandum of Understanding (MoU) regarding the development of Chabahar Port.
This was succeeded by a trilateral agreement in May 2016 involving India, Iran, and Afghanistan to establish the International Transport and Transit Corridor (Chabahar Agreement). India is actively involved in the first phase of the Shahid Beheshti Terminal's development at Chabahar Port, as stated by the Ministry of External Affairs.
In December 2018, India Ports Global Limited (IPGL) took over the operations of Chabahar Port through its subsidiary, India Ports Global Chabahar Free Zone (IPGCFZ).
In May 2024, IPGL entered into a ten-year contract with Iran's Ports and Maritime Organization (PMO) to equip and operate the Shahid Beheshti Terminal at Chabahar Port.