Trump’s Iran Trade Tariff Warning Rings Alarm Bells for Indian Rice Exporters

Donald Trump’s warning that countries continuing trade with Iran could face punitive tariffs has injected fresh uncertainty into already fragile trade corridors. While the specifics of implementation remain unclear, the signal itself has raised concerns among exporters who fear indirect penalties, higher transaction costs, or logistical hurdles linked to Iran-related trade.

For Indian exporters, the warning is particularly sensitive given Iran’s importance as a destination for agricultural shipments, especially basmati rice, which forms a core part of India’s agri-export basket to the region.

Iran Remains a Key Market for Indian Basmati

Iran is consistently among the top buyers of Indian basmati rice. Industry estimates show that Iran imports around 10–12 lakh tonnes of basmati annually from India, valued at approximately ₹11,000–13,000 crore, depending on global prices and currency movements. This accounts for a significant share of India’s total basmati exports, which average 5.5–6 million tonnes globally each year.

The Iranian market is particularly important for exporters in Punjab, Haryana, and western Uttar Pradesh, where basmati cultivation and milling are concentrated.

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Bilateral Trade Has Shrunk Sharply Over the Years

India–Iran trade has contracted substantially over the past decade. Total bilateral trade stood at roughly $1.6–1.7 billion in 2024–25, a fraction of the over $17 billion recorded in 2018–19, when India was a major buyer of Iranian crude oil.

India’s exports to Iran currently total about $1.2–1.3 billion, dominated by basmati rice, tea, sugar, pharmaceuticals, and agricultural produce. Imports from Iran, at around $400–500 million, include methanol, bitumen, liquefied petroleum gases, chemicals and dry fruits. The collapse in energy trade after 2019 permanently altered the scale of bilateral commerce.

Currency Stress and Payment Delays Already Hurting Exports

Even before the tariff warning, Indian exporters were grappling with Iran-specific challenges. The sharp depreciation of the Iranian rial has strained the purchasing power of Iranian importers, leading to delayed payments and renegotiation of contracts. Exporters estimate that shipments worth ₹1,500–2,000 crore have faced delays or temporary halts over the past year due to payment and insurance issues.

Logistical disruptions linked to regional tensions have also intermittently slowed shipments, increasing working capital stress for Indian exporters.

Why Tariff Threats Worry Exporters?

Exporters fear that tariff warnings could further complicate trade financing and insurance for Iran-bound shipments. Even without direct tariffs on Indian goods, heightened scrutiny of Iran-linked trade can raise freight costs, limit banking channels and deter shipping lines, indirectly hurting exporters.

Industry bodies warn that prolonged uncertainty could force exporters to scale back exposure to Iran or demand advance payments, potentially reducing volumes and impacting farmer realisations in the basmati belt.

Limited Alternatives in the Short Term

While Indian exporters are exploring diversification into markets such as Iraq, Africa, and Southeast Asia, replacing Iran’s scale is difficult in the short term. Iran’s preference for Indian basmati and long-standing trade relationships make it a critical market that cannot be easily substituted without price or volume trade-offs.

Also read: China Opposes Trump's Tariff Threat Against Nations Doing Biz With Iran