R. Suryamurthy
Barely two days after India’s Commerce Minister Piyush Goyal returned from Washington following “constructive” trade talks, US President Donald Trump has announced 100% tariffs on imported branded and patented pharmaceuticals starting October 1.
The move, pitched as part of his “America First” economic nationalism, puts India’s $10 billion drug exports to the United States under renewed scrutiny and underscores the fragility of a trade relationship that both governments had only days ago described as moving toward a “mutually beneficial” agreement.
The US is India’s single largest market for pharmaceuticals, accounting for nearly 40% of its drug exports.
For companies like Sun Pharma, Dr Reddy’s, Cipla, Lupin, Aurobindo and Zydus, the American market contributes between 30–50% of annual revenues. Most of these exports are low-cost generics that have long helped the US cut its healthcare costs.
But the new tariffs create uncertainty, especially around branded generics — off-patent drugs marketed under trade names. If Washington treats these as “branded imports,” they could fall within the tariff net.
“India’s pharma lifeline to the US cannot be taken for granted. A unilateral tariff stroke from Washington can destabilize the sector here,” said a senior trade policy analyst.
Manoj Mishra, Partner and Tax Controversy Management Leader at Grant Thornton Bharat, called it a “significant shift in trade policy”:
“The US decision to impose 100% tariffs on branded and patent-protected medicines is a significant shift, given that pharmaceuticals were earlier exempt from reciprocal tariffs and Section 232 duties. For Indian pharma, which supplies nearly USD 20 billion of generics to the US — about 40% of its consumption — the impact is twofold. Companies manufacturing branded products abroad for the US may face headwinds, while domestic generic producers could see near-term gains as higher prices for branded drugs push demand toward cost-effective alternatives.”
Global economists argue the impact may be smaller than headlines suggest. Neil Shearing, Group Chief Economist at Capital Economics, noted that exemptions for generics and for firms investing in US manufacturing dilute the effective bite:
“At first sight, a 100% tariff on pharmaceuticals looks dramatic. But exemptions for generics and for firms building US facilities mean the effective impact is smaller. Roughly 60% of pharma imports may be liable, but many companies already produce in the US or have inventory buffers. The bigger hit is to Europe, where countries like Ireland and Slovenia depend heavily on pharma exports to America. India, with its generics base, may see only indirect pressure.”
Yet for India, “indirect pressure” can still be destabilizing. Generics account for 90% of US drug volumes, but only around 10% of value. If tariffs shift consumer demand further from costly branded products toward generics, Indian firms could see higher volumes — but at wafer-thin margins. That leaves India’s pharma industry trading higher shipments for lower profitability, a shift hardly aligned with long-term growth.
The timing of Trump’s announcement is particularly damaging. India’s Ministry of Commerce had on Sept 26 issued a glowing statement about its delegation’s Sept 22–24 visit to Washington, highlighting “constructive meetings” with US Trade Representative Jamieson Greer and Ambassador-designate Sergio Gor. The Ministry said both sides agreed to pursue an “early conclusion of a mutually beneficial trade agreement.”
Yet Trump’s sudden tariff strike has punctured that optimism. “On one hand, Washington courts Indian investment and praises bilateral trade momentum. On the other, unilateral tariff shocks undermine that very confidence,” said a Mumbai-based pharma executive.
It is not an isolated instance. Trump has already imposed tariffs of up to 50% on Indian exports ranging from smartphones to shrimp, while also levying a 25% penalty duty linked to India’s purchase of Russian oil. For New Delhi, it raises a question: Can it negotiate trade peace while fighting tariff fires on multiple fronts?
Most analysts agree that Europe — with Ireland, Germany, and Switzerland supplying high-value branded medicines — will bear the brunt of the tariff. Ireland’s pharma exports to the US are equivalent to 12% of its GDP, compared to India’s far smaller exposure.
But India’s vulnerability is structural rather than numerical. With nearly two-fifths of its drug exports dependent on the US, each tariff tremor from Washington has the potential to disrupt planning and force costly diversification.
“Even if the direct impact on Indian exports is muted, over-reliance on the US market makes every tariff shock a strategic risk,” said Ajay Srivastava of the Global Trade Research Initiative. “Diversification is no longer optional.”
The contrast between upbeat trade talk and tariff action highlights a broader truth: India–US commercial ties remain transactional, vulnerable to political whims in Washington. The exemptions may soften the economic blow this time, but the signal is unmistakable — India’s pharma sector cannot rest on assumptions of permanent access to the US market.
The message from Trump is clear: if India wants secure access, it must either build more plants on US soil or accept recurring tariff shocks. The message for New Delhi is equally stark: a trade relationship billed as “mutually beneficial” is still subject to unilateral disruption, and India’s export-dependent industries must prepare for more turbulence ahead.
This report is from 5Wh news service.
(5WH/VK)