With the U.S. set to impose “reciprocal tariffs” on India from April 2, 2025, the Indian pharmaceutical industry—one of the country’s largest export sectors—is bracing for potential disruptions. These tariffs come as part of a broader U.S. policy aimed at countering import duties imposed by trading partners, including India. However, with the Free Trade Agreement (FTA) between India and the U.S. still under negotiation, uncertainty looms over the future of pharma trade between the two nations.
The U.S. heavily relies on Indian generics, with nearly half of its medicines sourced from India, saving billions in healthcare costs. In 2022 alone, Indian generics helped cut U.S. drug expenses by $219 billion. Any tariff hikes could make Indian exports less competitive, forcing companies to reconsider their market strategies, potentially leading to shortages of affordable medicines.
For Indian pharma companies, which already operate on thin margins, the increased tax burden could pose significant challenges. India exports approximately $12.7 billion worth of medicines to the U.S. annually, while American drug imports into India face a 10.91% duty. A reciprocal tariff would widen the cost gap, making it difficult for Indian manufacturers to maintain their current pricing.
Industry leaders have expressed concerns over the feasibility of shifting manufacturing to the U.S. Dilip Shanghvi, Chairman of Sun Pharma, recently stated, “Our pills sell for between $1 and $5 per bottle in the U.S., and tariffs do not justify relocating our manufacturing there.” Similarly, Umang Vohra, CEO of Cipla, remarked, “Tariffs should not ultimately dictate what businesses do, because there is a risk that four years later, those tariffs may go away.”
Manufacturing costs in India are at least three to four times lower than in the U.S., and setting up new facilities there could take years. To mitigate the impact, Indian industry bodies like the Indian Pharmaceutical Alliance (IPA) have suggested that India consider reducing import duties on U.S. pharmaceuticals to prevent further trade retaliation. The Indian government has already taken some steps in this direction by exempting 36 life-saving drugs from basic customs duties in its latest budget. However, whether this will be enough to secure a favrable trade deal remains to be seen.
With trade negotiations ongoing, both governments are under pressure to ensure a stable supply chain. Any prolonged tariff dispute could affect millions of patients and the financial health of Indian pharmaceutical companies, which rely on North America as a primary revenue source. The coming months will be critical in determining how India navigates this challenge while maintaining its position as a global leader in affordable medicines.
