Compounding the pressure, the U.S. Department of the Treasury recently sanctioned six Indian firms for allegedly facilitating oil transactions with Iran. These entities have been added to the Specially Designated Nationals (SDN) list, effectively severing their access to the U.S. financial system.

This marks a unique moment in India-U.S. relations, where Indian stakeholders are witnessing, perhaps for the first time, the simultaneous use of punitive trade and financial actions to influence both India’s foreign policy posture and its economic alignments. Notably, in targeting Indian companies, President Trump is in part following the Biden administration’s playbook, which had previously sanctioned multiple Indian firms and individuals for allegedly assisting Russia’s war effort—underscoring a bipartisan consensus in Washington on leveraging economic pressure to shape India’s strategic choices.

The Impact on Indian Exporters

What makes the current tariff regime particularly disruptive is its indiscriminate impact on sectors of the Indian economy that have no direct link to India’s energy trade with Russia. Export intensive industries such as textiles, footwear, and gems and jewellery which are dominated by small and medium enterprises are now facing disproportional punitive costs despite having no strategic or geopolitical exposure. These exporters are being caught in the crossfire of the U.S. administration’s intent to use both tariffs and sanctions as a method for foreign policy coercion.

The Sanctions Dimension

The sanctions imposed in July 2025 have more complex implications for India. While they directly affect only six Indian companies, the risks extend beyond those names. These are secondary sanctions, and the listed entities were penalised not for directly transacting with U.S. persons, but for facilitating Iranian trade in ways deemed sanctionable under U.S. laws. Any Indian entity that, knowingly or unknowingly trades in oil (or oil-linked products), offers shipping or port services, or finances such transactions may now face more scrutiny irrespective of the use of U.S. dollars, U.S.-linked banks, or U.S.-regulated insurers.

More broadly, Indian companies will now have to ask tougher questions about the origin of the products they trade in, and how payment and logistics are structured. Enforcement could be applied not just to direct buyers, but also to those enabling the ecosystem around it, even indirectly. Given the interconnectedness of global trade, even businesses with no U.S. presence find themselves impacted if their counterparties, banks, or insurers are subject to U.S. law.

For Indian conglomerates with global financing, insurance, or logistics dependencies, such risks are now real. Many have no meaningful or OFAC complaint compliance checks in place to prevent this and the result in de-risking by counterparties, is already leading to loss of business.

What Should Indian Businesses Do?

While the tariff orders and sanctions designations are distinct legal instruments, the sequencing and impact suggest a shared strategic purpose. For Indian businesses, the practical implications are immediate. Trade with any country that the US has a sanctions or tariff program against is no longer just a matter of customs paperwork and certificates of origin, it now requires close attention to geopolitical context, adherence to tariffs, sanctions lists, and regulatory exposure across jurisdictions.

Indian Companies should follow these proactive steps to mitigate these emerging risks:

• Comprehensive Sanctions Screening: Sanctions exposure must be mapped across the entire value chain. Indirect affiliations with designated entities through third-party logistics, insurance, or financial intermediaries can create significant compliance risks. Due diligence procedures should be immediately updated to reflect this heightened threat landscape.
• Supply Chain Risk Reassessment: Companies sourcing raw materials or components from restricted jurisdictions to gain a cost advantage must conduct a thorough review of their supply chains. This includes scrutinizing payment routes, intermediaries, and potential points of legal or financial liability.
• Reinforcement of Contractual Safeguards: All contracts with counterparties should be meticulously examined. It is crucial to insert or clarify clauses that explicitly assign liability for tariff increases, sanctions compliance, disclosure of trade risks and establish mechanisms for diligence and contract renegotiation.
• Financial Institutions: At most risk are Indian financial institutions which need to conduct tailored risk assessments and enhance due diligence, especially for clients and transactions linked to high-risk jurisdictions. Sanctions and Tariff specific KYC protocols and real-time screening against OFAC lists should detect potential violations early. Financial Institutions should relook their sanctions and tariff compliance policy to allow for operational flexibility while ensuring sanctions and tariff compliance.

A Broader Message in Trade Language

The U.S. has not announced sweeping sanctions or broad trade restrictions on India. But it has made its point using tools that are precise, technical, and commercially impactful. By targeting Indian companies engaged in trades liked to US Sanctions and then raising tariffs on Indian goods, the U.S. is asking Indian businesses and the government to pay attention to its foreign policy positions, not just its tariff schedules.

(The author Faraz Alam Sagar is a partner and co-head of the white collar & investigations practice at Cyril Amarchand Mangaldas. His views are personal and do not reflect the position of ET Legal.)