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A fresh round of tariff threats from US President Donald Trump has sparked alarm across India’s pharmaceutical sector, with investors and industry experts bracing for a potential blow to one of the most critical trade relationships between the two countries.
Speaking at the National Republican Congressional Committee event on Tuesday, President Trump announced plans for a “major” tariff on all pharmaceutical imports. The move, he claimed, is aimed at encouraging drug manufacturers to shift their production to the US. Until now, pharmaceuticals, along with semiconductors, had been exempted from the Trump administration’s broader tariff push.
However, the new stance could upend the current dynamics of the global drug supply chain and India stands to be one of the biggest casualties.
India’s Pharma Exports Heavily US-Dependent
The United States is India’s largest pharmaceutical export market. In FY24 alone, India exported $27.9 billion worth of drugs, of which $8.7 billion — nearly 31% — went to the US, according to the Pharmaceuticals Export Promotion Council of India.
India also supplies over 45% of the generic drugs and 15% of biosimilars used in the American healthcare system. Major Indian pharma companies including Sun Pharma, Dr Reddy’s, Zydus Lifesciences, Aurobindo Pharma, and Gland Pharma derive between 30-50% of their total revenues from the American market.
Stock Markets React Sharply
Indian pharmaceutical stocks slumped after Trump’s remarks. The Nifty Pharma Index fell by 1.7% on Wednesday, dragging down the broader Nifty 50 by nearly 0.59%.
Among the top losers:
- Biocon dropped over 5%
- Laurus Labs and Lupin fell between 3-4%
- Sector leaders Sun Pharma, Cipla, and Dr Reddy’s were down by 1-2%
Investors are rattled, with market analysts calling this development an “overhang” until the actual tariff specifics are announced. “This is playing a lot on investors’ sentiment,” said Shrikant Alkokar, equity analyst at Nuvama Group.
Experts warn the impact of higher US tariffs would be felt on both sides. Indian companies, already operating on thin profit margins in the generics space, may struggle to absorb the additional costs. These could either be passed on to American consumers and insurers — leading to higher drug prices and inflation — or force Indian manufacturers to scale down operations, risking drug shortages in the US.
“This could hurt both Washington and New Delhi,” analysts from HDFC Securities told Mint. “The US depends on India for affordable generics. Raising tariffs could disrupt this delicate balance.”
Currently, Indian pharma products face minimal tariffs in the US, while India imposes around 10% duty on US drug imports. Trump’s proposed reversal of this status quo could initiate a tit-for-tat tariff spiral.
Concerns Over US Manufacturing Feasibility
While President Trump argues that these tariffs will bring back drug manufacturing to American soil, many in the industry have raised doubts about the feasibility. Setting up large-scale pharmaceutical production in the US involves high capital investment, stringent regulations, and long gestation periods — a process that cannot be accelerated easily.
Moreover, any disruption to Indian pharmaceutical imports could strain America’s already fragile healthcare affordability landscape, especially for patients reliant on generic medicines for chronic conditions.
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