The United States has designated Iran’s elite Revolutionary Guards as a foreign terrorist organization, Donald Trump said on Monday, marking the first time Washington has formally named a branch of the armed forces of a foreign government as a terrorist group.

In a statement, Trump said this unprecedented step, “recognizes the reality that Iran is not only a state sponsor of terrorism, but that the [Islamic Revolutionary Guard Corps] IRGC actively participates in, finances, and promotes terrorism as a tool of statecraft”.

Iran responded soon after, designating the US a “state sponsor of terrorism” and its military forces in the region “terror groups”.

In a statement, the Supreme National Security Council declared “that it considers the regime of the USA a ‘state sponsor of terrorism’ and ‘the Central Command of America, known as Centcom’ and all forces related to it ‘terrorist groups’”, according to the Islamic Republic News Agency (Irna), a state-run news agency.

The council added: “The IRGC unlike America and its regional allies who have always supported extremist and terrorist groups in West Asia region, have always been in the frontline of fighting terrorism and extremism in the region.”

Critics have warned that the move could raise the risk of retaliation against US military and intelligence officials. The United States has already blacklisted dozens of entities and people for affiliations with the IRGC, but not the organization as a whole.

The move against Iran’s most powerful security organization comes nearly a year after Trump withdrew the US from the 2015 Iran nuclear deal and reimposed the sanctions that had crippled the nation’s economy.

On Twitter, Iran’s foreign minister, Mohammad Zarif called the move “A(nother) misguided election-eve gift” to the Israeli prime minister, Benjamin Netanyahu, who is facing a tough re-election campaign.

Netanyahu, who has repeatedly turned to the Trump administration for help, thanked him on Twitter: “Once again you are keeping the world safe from Iran aggression and terrorism.”

Iran’s state-run TV said the move contradicted international law. “No other country has the legal right to designate as terrorist another country’s armed forces ... Iran’s influence in the Middle East and its success in fighting against Islamic State are reasons behind this designation,” the broadcaster said.

The secretary of state, Mike Pompeo, a strident critic of Iran, has pushed for the change in US policy as part of the Trump administration’s tough posture toward Tehran. Pompeo told told reporters at a news conference on Monday that the designation will take effect in one week.

Pompeo, and the national security adviser, John Bolton, have both pushed the administration to adopt an even harder line against Iran.

In a tweet on Monday, Bolton said the move “demonstrates our commitment to maximize pressure on the Iranian regime until it ceases using terrorism as tool of statecraft”.

Experts have said it was unclear how much concrete difference the terrorist designation would make. It is already heavily sanctioned by the US as a terrorist supporter, and Iran is designated a state sponsor of terrorism.

Yet the move is likely to increase the trepidation on the part of foreign companies when it comes to trading with or investing in Iran.

After the designation takes effect, the US attorney general, William Barr, said “any person will be prohibited from knowingly providing material support or resources” to the IRGC.

“The IRGC’s active support for terrorism is unacceptable, and the Department of Justice continues to support the administration’s efforts to hold the Iranian regime accountable for its actions,” Barr said in a statement.

It will also complicate diplomacy. Without exclusions or waivers to the designation, US troops and diplomats could be barred from contact with Iraqi or Lebanese authorities who interact with Guard officials or surrogates.

“This action will significantly expand the scope and scale of our maximum pressure on the Iranian regime. It makes crystal clear the risks of conducting business with, or providing support to, the IRGC. If you are doing business with the IRGC, you will be bankrolling terrorism,” Trump said.

The IRGC controls a large slice of the Iranian economy (the Trump administration claims up to half), and the US treasury and state department have stressed that the onus is on foreign companies to find out if the partners they deal with in Iran are tied to sanctioned groups.

Iran’s close ally Syria condemned the move as a “blatant attack” on the country’s sovereignty.

The Republican senator Lindsey Graham, a prominent Iran hawk, praised the move.

“The IRGC has been wreaking havoc throughout the Middle East and is a direct arm of the Ayatollah’s hateful policies,” he said, adding: “This announcement is another example of their commitment to reining in the destructive and murderous Iranian regime.”