In a bold escalation of economic pressure on Iran, President Donald Trump has slapped a 25% tariff on all trade with countries doing business with Tehran, effective immediately. The sweeping measure, announced via Truth Social amid ongoing Iranian protests, catches nations like India off guard, threatening billions in exports and key strategic projects.

India, a major player in US trade with $80 billion in annual bilateral exchanges, now faces compounded duties that could balloon to 75% on select goods when layered atop existing penalties for Russian oil purchases. Exporters in textiles, gems, chemicals, and leather—accounting for over 50% of shipments to America—brace for price hikes that erode competitiveness, potentially costing $4-5 billion yearly and shaving 0.3-0.5% off GDP.

The tariffs hit at a vulnerable time for Indias Chabahar Port agreement with Iran, crucial for accessing Central Asia without relying on Pakistan. Though past US waivers helped, energy links persist; reduced Iranian crude imports still aid diversification, but any full cutoff risks rupee pressure and higher oil bills, reminiscent of 2018 sanctions that spiked global prices.

Government sources hint at urgent diplomatic outreach for exemptions, especially for pharma and semiconductors which remain untouched. Meanwhile, MSME support and partner diversification toward Russia or Saudi Arabia top the response playbook, avoiding retaliation to preserve tech inflows and broader deals. This tests Indias multi-alignment strategy yet again, balancing Washington ties with regional ambitions.

Disclaimer: This image is taken from NDTV.