On July 30, 2025, U.S. President Donald Trump announced that the United States would impose a 25 per cent tariff on all goods imported from India. This announcement was first made via a social media post[1] and triggered widespread concern among Indian exporters and multinational stakeholders with supply chain links to India. On July 31, 2025 it was formalised by an executive order[2] which imposed varying ‘reciprocal tariffs” on a range of goods from 69 countries and European Union, including India. For countries not listed, a default rate of 10 per cent will apply. This order will be effective on August 7, 2025.
On the heels of this announcement, on the same day, the U.S. Department of State imposed sanctions on six Indian companies among 20 entities for trading Iranian petroleum stating that the action is being taken to thwart the flow of revenue that the Iranian regime continues to use to fund terrorism abroad.[3] These sanctions have been imposed pursuant to the Executive Order 13846[4], which reinstated the earlier Iran-related measures that were lifted under the Iran nuclear deal, the Joint Comprehensive Plan of Action (JCPOA).
Taken together, these two developments signal a marked escalation in U.S. trade enforcement and foreign policy posture vis-à-vis India, combining tariff-based pressure with sanctions enforcement in the closely linked sectors of energy, commodities, shipping, and dual-use logistics.
Tariff Announcement: Trade and Contractual Impact
If implemented, the 25 per cent tariff is expected to apply uniformly across all Indian-origin imports, regardless of sector or product category. Indian businesses currently exporting to the U.S. face uncertainty about the timing, scope, and enforcement mechanisms, as no formal implementing instrument has been issued.
Industries likely to be affected include pharmaceuticals, automotive components, engineering goods, chemicals, textiles, and electronics. These are the sectors where Indian exports to the U.S. are significant and price-sensitive. Contracts that lack pricing buffers or indemnity clauses may come under stress, and supply relationships structured on thin margins could face commercial renegotiation or pause.
Sanctions on Indian Entities: Sectoral and Legal Implications
The sanctions imposed on six Indian companies, many of them operating in oil transport, shipping, or trading, highlight OFAC’s growing emphasis on enforcement beyond direct dealings with Iran. These are secondary sanctions, meaning the listed entities were penalised not for directly transacting with U.S. persons, but for facilitating Iranian oil trade in ways deemed sanctionable under U.S. laws.
This move reaffirms that non-U.S. entities, including Indian companies, remain at risk of U.S. sanctions exposure when engaging in trade flows involving Iran even when such trade is legal under Indian or international law. For Indian conglomerates with global financing, insurance, or logistics dependencies, such listings could result in de-risking by counterparties, loss of access to U.S. goods or services, or compliance costs across other jurisdictions.
Takeaways for Businesses
The parallel developments of tariff escalation and sanctions designations reflect a broader U.S. approach that blends traditional trade policy with extraterritorial enforcement tools. While the tariff relates to India’s trade with the U.S., the sanctions reflect a broader global scrutiny, potentially exposing Indian companies to geo-economic enforcement risks.
For Indian businesses with material exposure to U.S. markets or international trade corridors, this twin development raises a number of legal and commercial considerations:
- Contractual Review: Revisit U.S.-facing contracts to assess tariff pass-through clauses, indemnity provisions, and pricing buffers;
- Sanctions Screening: Ensure that counterparties, vessels, financing arrangements, and cargoes are not inadvertently connected to Iranian or Russian trade or other restricted supply chains;
- Regulatory Monitoring: Track updates from U.S. agencies such as OFAC for further implementing detail or carve-outs;
- Cross-Border Impact Analysis: Evaluate potential spillover effects of these actions on logistics, insurance, and financing arrangements especially for conglomerates or high-volume exporters;
- Reputational Risk Management: Consider the public optics and risk perceptions triggered by inclusion on sanctions lists, and their potential impact on banking and counterparty relationships.
The convergence of both announcements within a 24-hour window is noteworthy. It suggests a more targeted and forceful phase in U.S. trade policy toward India, particularly where Indian commercial interests intersect with U.S. geopolitical concerns.
In this environment, Indian companies would benefit from combining operational agility with legal foresight, closely monitoring official communications, and taking early steps to assess how these actions may affect their contractual, financial, and reputational positions in global markets.
[1] https://truthsocial.com/@realDonaldTrump/posts/114942106248731470.
[2] Further Modifying the Reciprocal Tariff Rates – The White House.
[3] Sanctioning Entities That Have Traded in Iran’s Petroleum – United States Department of State.
