August 1, 2025

In a surprising development, President Donald Trump announced a 25% reciprocal tariff on imports from India, effective immediately. This move is particularly concerning for Indian pharmaceutical companies, which derive a significant portion of their revenue from the U.S. market. Industry insiders fear that this steep tariff, applied to an already low-margin sector, will force companies to pass on the increased costs to consumers. Analysts suggest that there is scope for a possible reduction in the tariff rate, given the importance of the pharma industry in providing affordable healthcare. Bino Pathiparampil, head of research at Elara Capital, believes negotiations may lead to a softer rate of 10-15%, similar to tariffs placed on some European countries. Such reductions would be more manageable for Indian pharma companies, which are already operating on thin profit margins. Despite the uncertainty surrounding the new tariffs, some industry leaders remain optimistic about potential exemptions for the pharma sector. Vishal Manchanda, a pharma analyst at Systematix Group, indicated that the U.S. may recognize the critical role of Indian generics in keeping healthcare costs down and may roll back the proposed tariffs. Considering that India supplies around 40% of the medicines consumed in the U.S. market, imposing heavy tariffs could lead to antibiotic and cancer drug shortages, affecting patients significantly. Additionally, analysts have been predicting the likelihood of a 10% tariff on pharma imports from India. Even if just half of this cost is transferred to consumers, major players in the Indian pharmaceutical industry could see a 3-5% impact on their earnings in fiscal 2027. Manoj Mishra, tax leader at Grant Thornton Bharat, pointed out that the announcement did not specifically mention new tariffs on the pharma sector; however, the aggressive language used by Trump suggests that companies should remain vigilant and prepared for adjustments that may arise. Leading firms like Dr Reddy’s, Cipla, Lupin, and others have a significant stake in the U.S. market, with Indian exports of formulations valued at approximately $9 billion. This export figure underscores India's vital position, especially as the European Union exports considerably less relative to its market population. Despite concerns, some executives, like Erez Israeli, CEO of Dr Reddy’s Laboratories, noted that this potential tariff is an unknown that could influence the company’s direction in the coming quarters. However, Umang Vohra, CEO of Cipla, reassured investors that while any increase in tariffs would certainly have some impact, it would not cripple business operations. Industry officials remain hopeful that ongoing negotiations will lead to a reconsideration of these tariffs. A source within the pharma industry emphasized the strength of the U.S.-India relationship and expressed confidence that the U.S. government would seek a balanced approach to the tariff situation. The successful outcome of these negotiations is crucial not just for Indian pharma companies, but also for U.S. consumers who rely on affordable medicines. As developments unfold, Indian pharmaceutical companies are watching closely for updates and preparing to adapt to the potential economic impact of the tariffs. The industry remains resilient, with many stakeholders believing that collaboration and dialogue between the two nations will pave the way for a favorable resolution.

Read More at Economictimes →

Tags: Pharma, Tariffs, Us-india trade, Generic drugs,