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COVER STORY JANUARY 23, 2026 | The Indian Eye 5

The tariff shock these moves suggest a hardening
US posture that prioritizes coercion
resident Trump’s announce- over accommodation — even with
ment that any country doing strategic partners.
Pbusiness with Iran would face a Tharoor warned that at punitive
blanket 25 per cent tariff on “any and tariff levels, “the strategic partner-
all business” with the US has added ship ceases to have any meaning.”
a sharp economic edge to the crisis. His remarks underline a growing
The Indian government has suggest- concern in New Delhi that India is
ed the impact may be “minimal,” being asked to absorb economic pain
noting that India–Iran trade stands at without sufficient regard for its in-
about USD 1.6–1.68 billion, just 0.15 terests or constraints.
per cent of India’s total trade. Balancing the strategy
But critics argue this is a narrow
and misleading assessment. ndia’s challenge is to navigate this
crisis without alienating either
Congress MP and Standing Iside. Openly opposing Washing-
ton risks worsening trade and diplo-
Committee on Foreign Affairs matic ties; abandoning Iran under-

Chairman Shashi Tharoor mines India’s regional strategy and
long-term connectivity goals.
warned that the Iranian tariff A group of Iranian People stage a protest outside of Iran embassy against the current regime The stakes are further raised by
cannot be viewed in isolation. in New Delhi on Wednesday (ANI Photo/Sumit) Iran’s formal entry into the BRICS
grouping, even as India assumes the
“The 25 per cent was already a bloc’s presidency in 2026. Any esca-

problem. Now, you have 25 per According to CBS News, Gulf states Gulf. Such shocks would directly hit lation involving Tehran would com-
have warned Washington that strikes
plicate New Delhi’s BRICS agen-
India’s economy, inflation outlook
cent more for Russian sanc- on Iran could destabilize the region and balance of payments. da, testing India’s ability to balance
tions which takes it up to 50 economically and militarily, while The Iran crisis is unfolding at a strategic autonomy with deepening
also cautioning Tehran against retal- time when Indo-US relations are al- engagement with the United States.
per cent and if there are 25 per iatory attacks on US facilities. ready described by opposition lead- So far, New Delhi has opted for
cent more in Iranian sanctions, These fears are not abstract. The ers as “very turbulent.” Congress cautious engagement: urging its citi-
Pentagon has already redeployed MP Jairam Ramesh has pointed to zens to leave Iran, engaging the US on
that it takes it up to 75 per a US carrier strike group to the a “new abnormal” in ties, citing not sanctions waivers, and publicly avoid-
cent,” he said. CENTCOM area, while personnel only tariffs linked to Iran and Russia ing commentary on potential military
at Al Udeid Air Base in Qatar have but also proposed US legislation tar- action. This calibrated approach re-
been advised to leave as a precau- geting India’s trade practices. flects India’s desire to keep diplo-
“At 75 per cent, no Indian com-
Ramesh noted that US Senator
pany will be viable in exporting to tion. Iran, for its part, has reportedly Lindsey Graham is pushing a bill matic space open as events unfold.
Yet, the room for maneuver is
warned that certain countries could
America,” Tharoor added, pointing face missile strikes if the US attacks. that could impose “vast new sanc- shrinking. A US–Iran war would
out that India’s labor-intensive ex- For India, any escalation could tions” on India for its ties with Rus- force harder choices, particularly if
ports — gems and jeweler, marine disrupt oil supplies, spike global en- sia, while another proposal seeks a sanctions tighten further or if India’s
products, leather and shrimp — al- ergy prices, threaten shipping lanes 25 per cent tax on American compa- assets and personnel in Iran and the
ready face tougher tariffs than com- through the Strait of Hormuz, and nies making outsourcing payments. Gulf are directly threatened.
petitors like Vietnam, Thailand, In- endanger Indian workers across the Together with Iran-linked tariffs, The unfolding confrontation
donesia, Pakistan and Bangladesh. between the US and Iran illustrates
In effect, the Iran-linked tariff
risks compounding existing trade how great-power rivalry and unilat-
eral economic measures can entan-
disadvantages, making Indian ex- gle countries like India in difficult
ports uncompetitive in the US mar- trade-offs. While India’s direct trade
ket and hollowing out sectors that with Iran may be modest, its indirect
employ millions.
exposure — through energy, region-
War in the Gulf al stability, connectivity projects and
cumulative tariffs — is substantial.
eyond tariffs, a US war on As Gulf diplomats have warned,
Iran would have far-reach- once tensions spiral into open con-
Bing consequences for the flict, “there could be lots of con-
entire region — and India is deep- sequences.” For India, those con-
ly exposed to that fallout. The Gulf sequences would likely include
remains India’s primary source of economic shocks, strategic setbacks
energy, a major destination for its and a further erosion of trust in an
exports, and home to over eight mil- already strained partnership with
lion Indian expatriates. Washington.
US allies in the Middle East Whether diplomacy prevails or
— including Saudi Arabia, Qatar, confrontation escalates, the Iran cri-
Egypt and Oman — are reportedly Local people gather to express solidarity with Iran’s Supreme Leader, Ayatollah Syed Ali sis is fast becoming a defining test of
engaged in an intense diplomatic Khamenei, amidst Iran’s rising tensions, in Srinagar on Friday (ANI Photo) India’s foreign policy balancing act in
push to avert military confrontation. an increasingly unpredictable world.

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