Indian drugmakers earn a significant share of revenue from the United States, the largest importer of Indian pharma products.
United States President Donald Trump has said that he will impose tariffs on automobile, semiconductor and pharmaceutical imports of around 25 percent and the announcement is set to come as soon as April 2.
The new duties, if implemented, would widen the president’s trade war. Earlier, the US President has announced 25 per cent tariffs on steel and aluminum that are set to take effect in March. On Tuesday, he shared specifics details on which other sectors would be hit with fresh barriers.
“I probably will tell you that on April 2, but it’ll be in the neighbourhood of 25 per cent,” Trump told reporters at his Mar-a-Lago club when asked about his plan for auto tariffs.
Asked about similar levies on pharmaceutical drugs and semiconductor chips, the president said: “It’ll be 25 per cent and higher, and it’ll go very substantially higher over a course of a year.” Trump said he wanted to give companies “time to come in” before announcing new import taxes.
“When they come into the United States and they have their plant or factory here there is no tariff, so we want to give them a little bit of a chance,” he said, as quoted by Financial Post.
According to Financial Post report, many economists say they would raise consumer prices for Americans and hinder the fight against inflation. Trump also announced that he would apply “reciprocal” levies on a country-by-country basis as soon as April. However, specific details are yet to be determined. He has also threatened duties on some of the U.S.’s biggest trading partners, such as a 10 per cent rate already applied to China and 25 per cent tariffs on Canada and Mexico that have been deferred until at least March 4.
The Financial Post report highlighted that if enacted, would remake supply chains and trade flows — and U.S. prices. Importers pay tariffs, which may raise consumer prices unless offset by price cuts abroad.
What this means for India?
Indian drugmakers earn a significant share of revenue from the United States, the largest importer of Indian pharma products. India’s pharma exports to the country stood at $8.73 billion in fiscal 2024, accounting for nearly 31 percent of the industry’s overall exports, as per data from government-backed trade body Pharmaceuticals Export Promotion Council of India (Pharmexcil).
“The Indian pharmaceutical industry plays a vital role in ensuring access to affordable, quality-assured medicines in the US, supplying nearly 47% of the generic medicines for the American patients and contributing significantly to the country’s healthcare savings. The proposal regarding reciprocal tariffs is currently under talks and is being examined. This matter will be discussed through bilateral engagements between the two countries, and further steps will be determined accordingly,” Sudarshan Jain, Secretary General, Indian Pharmaceutical Alliance (IPA) told Financial Express.com.
Jain also highlighted that India and the US share a long-standing, collaborative partnership in healthcare. “We are confident that continued dialogue among stakeholders will help address the subject. Ensuring the continued availability of affordable medicines remains a shared priority for both nations,” Jain informed.
Following US President Donald Trump’s proposal, stocks in the Nifty Pharma index were down by as much as 10 percent. Major pharmaceutical companies like Dr. Reddy’s Laboratories, Sun Pharma and Cipla saw massive dip. Reportedly, Indian pharmaceutical companies like Dr. Reddy’s Laboratories, Lupin, Cipla, and Zydus are more vulnerable to this move than automakers.
While only 0.2% of India’s car exports go to the US, according to SBI Research data, the 25% tariff could have a more significant effect on Indian drugmakers, who export over 38% of their products to the United States. A News18 report revealed that this move can could reduce earnings estimates for FY26 by 6.5% for companies like Dr. Reddy’s, Lupin, and Cipla, according to a report from multinational brokerage Nomura on February 15.
The report also stated that Sun Pharma and Torrent Pharma are likely to be less affected due to their lower reliance on US generics sales.
“The proposed 25 percemt tariff on U.S. drug imports highlights the evolving landscape of global pharmaceutical trade. While this poses imminent challenges, it also presents an opportunity for India’s pharmaceutical industry to innovate and reinforce its role as a key supplier of high-quality, affordable medicines,” Hari Kiran Chereddi, Managing Director, HRV Global Life Sciences & CEO, New Horizon Global Pharma told Financial Express.com.
Drug shortage expected?
On February 1, President Donald Trump announced a 10% tariff on Chinese imports, as well as a 25% tariff on goods from Canada and Mexico, in response to “the extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl.” According to a report by Fortune Well, pharma distributors and medtech manufacturers raised their concerns and slammed the new administration’s expected impact on industry and individuals.
Healthcare Distribution Alliance (HDA), a trade group representing pharmaceutical distributors, maintained that exempting medical products from tariffs is one solution and emphasised that the president should consider long-term investments in and incentives for domestic manufacturing to bolster the nation’s medical supply chain.
“We are concerned that placing tariffs on generic drug products produced outside the U.S. will put additional pressure on an industry that is already experiencing financial distress,” the HDA said in a Feb. 2 statement. “Distributors and generic manufacturers cannot absorb the rising costs of broad tariffs. It is worth noting that distributors operate on low profit margins—0.3%.
“As a result, the U.S. will likely see new and worsened shortages of important medications, and the costs will be passed down to payers and patients, including those in the Medicare and Medicaid programs.”
According to the Fortune Well report, prescription drug costs have long been a contentious policy point and it have been a critical issue in both 2024 Election Cycle as well as 2025.
Nearly half of U.S. adults (41%) believe the country is headed in the wrong direction owing to Trump’s drug price policies, according to a West Health–Gallup poll released days before the inauguration. Republicans (78%) were more likely than Democrats (4%) and independents (27%) to say Trump’s drug price agenda was moving the country forward.
It is noteworthy that these tariffs can fuel an increase in drug prices in part because China is the world’s leading producer of active pharmaceutical ingredients, or APIs. A report by the Observatory of Economic Complexity revealed that the United States became the top importer ($168 billion) of pharmaceutical products in 2022. According to the Association for Accessible Medicines (AAM), tariffs will only muddle this dependence.
“The global supply chain for generic and biosimilar medicines is critically important for U.S. patients. From the base ingredients to the finished products, U.S. medicines rely on a global supply chain that is already stressed and in need of strengthening,” AAM president and CEO John Murphy III said in a Feb. 2 news release. “Tariffs on products from Canada, Mexico, and China could increase already problematic drug shortages.”
Adding, “Americans pay less for generics than almost anywhere in the world,” Murphy highlighted that the previous Trump administration didn’t impose tariffs on generics.
How MedTech sector will be affected?
Reportedly, MedTech Companies are also anticipating negative impact from Trump’s tariffs. According to Scott Whitaker, president and CEO of the Advanced Medical Technology Association (AdvaMed), the imposition will not only cause financial harm but also prevent innovation.
“R&D spending would likely be the first and most direct casualty, threatening America’s medtech innovation leadership,” Whitaker said in a February 1 statement. “Increased tariffs may even have the unintended consequence of boosting the competitiveness of medtech industries of other nations.”
Impact on APIs
A report by Medicinemaker revealed that some US-based stakeholders are looking to bring more API manufacturing operations to US shores. The Missouri-based API Innovation Center, for example, received $9.55 million from the state in January to do just that, the report revealed.
A 2024 white paper prepared by the API Innovation Center outlines a national strategy to reshore at least 25 percent of small molecule API production to the US by 2030. The current dependency on China and India for APIs, according to the report, is being viewed as a national security risk because of supply chain vulnerabilities, quality issues, and geopolitical uncertainties.
The White paper also revealed that around 83 percent of the top 100 generic medicines prescribed in the US have no domestic API source and more than 90 percent of common antivirals and antibiotics also rely on imported APIs. Whilst US API production has decreased by 61 percent in the past ten years, India and China have seen dramatic increases in their production capacities, it stated.
Reportedly, US drug manufacturers struggle to compete with low-cost foreign suppliers. Moreover, the FDA’s slow approval process for alternative manufacturing methods has also been viewed as a cause for discouragement in investment.