US President Donald Trump’s threat to levy a 25 per cent duty on countries trading with Iran is set to compound the pressures on Indian exporters, particularly of basmati rice and tea, even as India’s overall external trade may remain largely unaffected.
The bilateral trade with the West Asian country, now in the midst of unprecedented social and political upheaval, stood at $1.68 billion in FY25, about 0.15 per cent of overall trade. Basmati rice is the largest component of India’s $1.24 billion export to Iran, which is the second largest destination for the variety, a staple for the 90 million-odd population.
Indian teas, especially the orthodox category (leaf tea), also find a large market in the country. With Trump dangling a tariff threat, the exporters who are already struggling with payment delays and uncertainties linked to Iran-bound shipments, apprehend further disruption in trade flows and financing channels.
“It is unclear as of now if food commodities like tea will be affected by the US decision. We have sought clarification and guidance from the ministry of commerce,” Anshuman Kanoria, chairman of Indian Tea Exporters’ Association, said.
Uncertainties have compounded as Trump’s post on social media platform is yet to be followed by an executive order from the US government. “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,” Trump posted.
Iran is already placed under economic sanctions by the US treasury department, which forced winding down of crude oil export to India. However, the sanctions also had explicit exclusions.
Pointing to that, Federation of Indian Export Organisation (FEIO) said it does not expect any adverse impact on India.
“Indian companies and banks are in full and demonstrable compliance with OFAC sanctions on Iran, engaging exclusively in clearly permitted humanitarian trade, mainly in food and pharmaceuticals. Therefore, we do anticipate any adverse impact on India. That said, an explicit clarification would conclusively remove any residual ambiguity and provide complete assurance to all stakeholders,” Ajay Sahai, director-general of FIEO, observed.
India’s ministry of external affairs is yet to comment on the development. Apart from bilateral trade, a key aspect of Indo-Iran ties is joint development of Chabahar port, which is being developed by India and Iran to boost connectivity and trade.
Basmati rice
India has so far exported 5.98 lakh tonnes of rice from April 1 to November 30, 2025. However, in view of the prevailing geopolitical situation, the export is certainly going to take a hit, said Vinod Kaul, director general of Indian Rice Exporters’ Federation (IREF).
“Iran is the second largest market for basmati rice. It is an essential commodity for the people of the country. Because of the breakdown of the payment system, exporters are not being paid for their supply. How Iranians will get their daily food item is now a million-dollar question,” he asked.
Akshay Gupta, head of bulk export at rice exporter KRBL, pointed out that trade with Iran has been on the wane due to increased market restrictions.
“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 in mitigating 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.
Tea trade
India exported 10.69 million kg of tea to Iran between January-November 2025 compared with 8.32 million kg in the same period of last year, according to the latest trade statistics.
However, Iran consumes 40-50 million kg of Indian teas, making it a top destination for Indian tea exports, Kanoria pointed out. Industry participants say the bulk of the export to UAE (45.66 million kg between Jan-Nov period) finds its way to Iran.
Maintaining a healthy export is key to the health of the domestic tea industry. A glut in the local market can drive down prices and hit the bottomline of the growers.