Trump's new 25% tariff on countries trading with Iran complicates India's engagement, particularly at Chabahar Port. This move undermines a previous waiver, injecting uncertainty into regional stability and India-US ties. India faces a strategic setback if its role at Chabahar diminishes, potentially allowing China to fill the void.
Ever since the second Trump administration assumed office, India has faced renewed tension in balancing its geopolitical and geoeconomic priorities. The latest manifestation of this pressure is President Donald Trump’s announcement of a 25 percent tariff on any country engaging in trade with Iran. While framed as a universal measure, the move complicates India’s carefully calibrated engagement with Tehran particularly its involvement in Iran’s Chabahar Port. Coming on the back of the existing trade tariffs, this adds another potential curveball in India’s efforts to navigate the Trump administration.
The tariffs come close on the heels of a six-month waiver that India had secured from Washington in October 2025 for its operations at Chabahar. That waiver was widely interpreted as a temporary window to recalibrate and reassess India’s presence at the port. The new tariff threat, however, problematises that exemption and injects fresh uncertainty into an already fragile regional environment. More broadly, it risks pushing Iran and the Middle East closer to another cycle of escalation.
The new tariff threat, however, problematises that exemption and injects fresh uncertainty into an already fragile regional environment.
Trump’s approach to Iran has followed a familiar pattern. During his first term, the U.S. withdrew from the Joint Comprehensive Plan of Action (JCPOA) in 2018 and launched a “maximum pressure” campaign aimed at economically isolating Tehran through sweeping sanctions on oil exports, banking, shipping, and third-party trade. Although the Biden administration rhetorically committed to diplomacy, most core sanctions architecture remained intact, with enforcement fluctuating but never fundamentally reversed. Iran has for long been an issue in India-US relations, including in the aftermath of the 2008 civil nuclear deal when the pressure on India to align its Iran policy with western non-proliferation objectives grew.
Trump’s return has revived the coercive edge of this strategy, with tariffs now serving as a tool to deter third countries from maintaining economic ties with Iran. This approach mirrors earlier U.S. tactics against Venezuela, where sanctions and secondary penalties were used to choke off oil exports and create a de facto strategic blockade. In Iran’s case, the objective appears similar, to wean partners away, collapse economic lifelines, and corner Tehran with the possibility of resorting to military force looming large.
For India, Chabahar is not merely a commercial port project. It is a strategic asset that ties together civilisational links, regional connectivity, and expanding security interests. The port offers India a rare overland and maritime gateway to Afghanistan, Central Asia, and onward to Russia, even as its alternative access remains structurally constrained by Pakistan’s long-standing refusal to grant India transit rights. Sanctions on Iran and disruptions since the Russia-Ukraine war have had a debilitating impact preventing the connectivity vision from attaining its full potential.
Sanctions on Iran and disruptions since the Russia-Ukraine war have had a debilitating impact preventing the connectivity vision from attaining its full potential.
India signed a 10-year contract with Iran in May 2024, under which the state-run India Ports Global Ltd (IPGL) committed investments of around $370 million for the development of the Shahid Beheshti terminal at Chabahar. The agreement, signed with Iran’s Ports and Maritime Organization, was intended to provide operational stability and signal India’s intent to remain engaged despite geopolitical headwinds. Trump’s announcement has run against it.
Yet recent statements from New Delhi suggest that India is reassessing its options. While the six-month waiver was initially seen as an exit ramp, India now appears to be exploring ways to sustain its presence, reflecting the careful assessments about costs involved and the strategic value Chabahar holds for India’s wider maritime and Indo-Pacific ambitions. India is not alone in facing the repercussions of Trump’s tariffs on Iran. Countries such as China, the UAE, Brazil, Turkey, and Russia which maintain varying degrees of economic engagement with Iran stand to be affected.
The broader implications extend beyond bilateral frictions. Iran sits astride the Strait of Hormuz, a critical artery for global energy flows and Indo-Pacific supply chains. Any destabilisation of Iran’s economy or security environment risks spill over effects that could disrupt trade, raise insurance and shipping costs, and undermine investment confidence for the Indo-Pacific region. For India, which is expanding its footprint in the Middle East through energy and infrastructure connectivity as well as diaspora ties, the loss or downgrading of Chabahar would be a strategic setback.
A renewed U.S. economic or military coercion against Iran, risks derailing any prospects for regional stabilisation, including progress on Gaza.
The timing of it all may be critical. Iran is already under internal strain, and the cancellation of a recent visit by Iran’s foreign minister to India, where the future of Chabahar was expected to be a key agenda item, underscores the urgency. Meanwhile, the Middle East remains volatile with fragile ceasefires and unresolved conflicts. A renewed U.S. economic or military coercion against Iran, risks derailing any prospects for regional stabilisation, including progress on Gaza.
For India, the dilemma looms, even as it negotiates a trade deal with the US and deepens strategic alignment in the Indo-Pacific - all this while preserving its traditional partnerships and regional autonomy. The latest U.S. measures may not explicitly target India, but their ordered impact is unavoidable. Beyond lost economic opportunity, a diminished role at Chabahar would undercut India’s maritime vision and its aspiration to act as a stabilising power across the Indo-Pacific and West Asia. Perhaps most expectedly, China will swoop in to fill any void that would be left by India’s withdrawal.
As Trump heightens pressure on Iran, externalities will increasingly shape India’s choices. To a hammer, everything may look like a nail but for New Delhi, navigating this moment will require deft balancing and conversations with Washington.
This commentary originally appeaed in The Economic Times.
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Professor Harsh V. Pant is Vice President - ORF and Studies at Observer Research Foundation, New Delhi. He is a Professor of International Relations with ...
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