India’s pharmaceutical sector is staring at heightened uncertainty following US President Donald Trump’s recent increased tariff on Indian goods. On August 1, the US imposed a 25% tariff on Indian imports and on August 6, he raised the tariff to 50%, though pharmaceuticals were initially exempt. However, President Trump has now indicated that pharmaceutical and semiconductor products may soon face incremental tariffs, starting with small increases and rising to as much as 200% within 12 to 18 months.
“We’re going to be announcing pharmaceuticals, chips and a couple of other things you know, big ones,” Trump said during a recent announcement on tariffs, where copper was also targeted.
The United States is India’s largest pharmaceutical export destination, with exports valued at $9.8 billion in FY25 a 21% jump from the previous year’s $8.1 billion. The US alone accounts for nearly 40% of India’s total pharma exports.
Indian exports to the US largely consist of low-cost generic medicines, which are critical to the American healthcare system. Generics currently represent over 90% of all prescriptions filled in the US. However, a proposed tariff of up to 200% could render Indian generics unaffordable and uncompetitive in the American market. Given the tight pricing margins in the generics sector, most exporters particularly smaller firms may find it impossible to absorb such cost increases, potentially leading to market withdrawal.
Investor concerns have already surfaced. Pharma stocks in India slipped by 2% to 4% in intraday trading after Trump’s statement, reflecting market apprehension.
Indian Industry Pushes Back
Despite the escalating threat, domestic pharma companies appear unfazed at least publicly. A spokesperson from a leading Indian pharmaceutical association told FE that while the initial impact is uncertain, the industry cannot sustain business in the US under inflated cost pressures.
It will be difficult for companies to absorb additional costs. If tariffs are imposed, we will be forced to shift focus to other markets. Ultimately, it’s the US consumers who will suffer, because no other country can offer generic medicines at India’s price and scale, the official said.
Critical Supply Chain at Risk
Bhavin Mukund, Vice Chairman of Pharmexcil, emphasized the potential consequences for American patients. “A tariff of this magnitude must take into account its effect on access to affordable, quality medicines. India has been a trusted global supplier of essential drugs including to the US and we remain committed to engaging with stakeholders to ensure resilient and uninterrupted supply chains,” he said.
Who Will Fill the Gap?
Experts warn that high tariffs could aggravate the US’s ongoing drug shortages. Even if companies shift manufacturing to the US, setting up new facilities will take 2–3 years. With China facing its own strategic challenges with the US, there’s no other country with India’s generics production capacity, the pharma association official added.
India’s total pharma exports for FY25 stood at over $30 billion, with the US alone accounting for more than a third in value and nearly 40% in volume terms of America’s generic drug imports.
