US President Donald Trump has exempted pharmaceuticals from his reciprocal tariff plan announced on April 3. While he imposed a 26% tariff on other imports from India, this exemption has provided significant relief to pharmaceutical companies. However, experts warn that the relief may be short-lived.
Tausif Shaikh, India Analyst – Pharma and Healthcare, BNP Paribas India shared that the Trump administration imposed individualised reciprocal higher tariffs on countries with whom the US has large trade deficit, with a 26 percent discounted rate on India and 10 percent universal baseline tariff on all imports.
“As per the fact sheet shared by the White House, pharmaceuticals are exempted from higher reciprocal tariffs. However, we wait for more details and note that higher tariffs are not completely ruled out for the future on pharmaceuticals. Assuming a 10% tariff is imposed on pharma products, we expect the impact to be negligible. With the sector exempted from reciprocal tariffs currently, we expect a relief rally for the Nifty Pharma Index, after its 11% YTD decline,” Shaikh said.
The analyst also revealed that tariff costs to be shared across manufacturers, members of the supply chain and consumers. “Any incremental tariff (if imposed) would have to be absorbed by the manufacturer or members of the supply chain (retailer, distributor, pharma benefit managers) along with consumers. We believe Indian generic companies will bear only a small proportion as they operate at a low margin compared to innovators,” he said.
In its India Pharmaceuticals Report – April 2025, the firm also noted that news flow related to the possible imposition of tariffs has led to higher stock price volatility across the sector over the last few months.
“Note that the Nifty Pharma Index has declined by 11% YTD. The exemption from reciprocal tariffs should be seen as a positive readout with no negative surprises. We continue to prefer domestic focused companies like TRP and JBCP in the sector,” he said.
Meanwhile, Saurabh Agarwal, Tax partner, EY India said that India’s pharmaceutical sector enjoys protection from reciprocal tariffs, keeping it insulated from tariff increase.
“Additionally, Indian goods face significantly lower tariffs in the US compared to those from China and Vietnam (additional difference arising on account of reciprocal tariffs released being 7% and 19% less, respectively), creating possibility of growth potential for India’s telecommunication and textile manufacturing sectors. While 18% of India’s total exports are destined for the US, anticipated supply chain shifts are expected to open new export opportunities,” Agarwal said.
Although short-term export fluctuations may occur, the mid-to-long term outlook suggests possible export growth for India (contingent on final international trade negotiations with the US).
“To fully leverage this potential, the Indian government should expand existing Production Linked Incentive (PLI) schemes in these sectors to cover a wider range of products and extend their duration by two years, thereby bolstering domestic industries’ investment and global competitiveness, he shared.
According to analytics firm IQVIA, Indian generics saved the US healthcare system $219 billion in 2022 and $1.3 trillion between 2013 and 2022. Moreover, Indian drug makers provide nearly half of the generic medicines covered by US federal medical insurance Medicare and commercial insurance plans. Four out of every 10 prescriptions filled in the US were for drugs manufactured by Indian firms.
The exemption applies broadly to all pharmaceutical products, ensuring that the drugmakers avoid immediate cost pressures. The development will have a positive impact on companies like Sun Pharma, Dr Reddy’s, Zydus Lifesciences, Aurobindo Pharma, Lupin and Biocon, who get significant revenue share from US.
