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Industry insiders in India warn that any such move in the pharmaceutical sector could be counterproductive for the US as it may face increased drug shortages if tariffs are imposed on such imports.
The US is likely to impose around 25 per cent tariffs on automobile, pharmaceutical, and semiconductor imports, with a formal announcement expected by April 2, said American President Donald Trump -- marking the latest move in a string of trade measures that could disrupt commerce globally and with India.
Industry insiders in India warned that any such move in the pharmaceutical sector could be counterproductive for the US as it may face increased drug shortages if tariffs are imposed on such imports.
Meanwhile, the impact on the automobile sector in India is expected to be relatively limited, as the country exports a minuscule number of vehicles to the US. Component exporters, on the other hand, are in a wait-and-watch mode.
Pharmaceutical executives believe the proposed tariffs could lead to a shift in production to the US, which would not only drive up the cost of finished medicines there but also exacerbate shortages in the short to medium term.
Speaking to reporters at his Mar-a-Lago club, Trump said tariffs could rise “very substantially” over the course of a year and stressed that he wanted to give companies time to relocate their operations to the US before enforcing new import taxes.
“When they come into the United States and they have their plant or factory here, there is no tariff. So we want to give them a little bit of a chance,” he said.
India supplies 47 per cent of the US's generic medicines, making it the largest source of affordable pharmaceuticals, ahead of domestic producers (30 per cent), West Asian countries (11 per cent), and Europe (5 per cent).
The Indian Pharmaceutical Alliance (IPA), which represents the country's leading research-driven pharmaceutical firms responsible for nearly 80 per cent of India's pharma exports, stated that the issue would be “discussed through bilateral engagements” between the two countries and further steps would be determined accordingly.
“The Indian pharmaceutical industry plays a vital role in ensuring access to affordable, quality-assured medicines in the US, supplying nearly 47 per cent of its generic medicines and contributing significantly to health care savings,” said Sudarshan Jain, secretary general of the IPA.
“The proposal regarding reciprocal tariffs is under discussion and is being examined.” This matter will be addressed through bilateral engagements, and further steps will be determined accordingly.”
Jain underscored the long-standing partnership between India and the US in healthcare, expressing confidence that continued dialogue among stakeholders would help resolve concerns.
“Ensuring the continued availability of affordable medicines remains a shared priority for both nations,” he said.
Industry insiders, however, believe that the US may hesitate to impose heavy tariffs on the Indian pharmaceutical sector, given the potential for exacerbating drug shortages.
According to the American Society of Health-System Pharmacists (ASHP), there were shortages of 271 drugs in the US by the third quarter of 2024, down from a record 323 in the first quarter.
Manufacturing delays, including disruptions caused by Hurricane Helene, led to 12 new shortages of critical and life-saving fluids. Nearly half of all active shortages (48 per cent) began in 2022 or earlier.
“Patients are forced to skip doses or take less than prescribed due to shortages. The situation is particularly dire for injectables and older generics. Several US manufacturers have ceased generic production due to low prices and thin margins. Additionally, supply disruptions are occurring as manufacturers struggle to meet FDA quality standards,” said a Gujarat-based mid-sized exporter.
The managing director and CEO of a leading Indian export-focused firm warned that shifting manufacturing to the US could present additional challenges, particularly in sourcing active pharmaceutical ingredients (APIs), leading to short-to-medium-term shortages.
“If tariffs are imposed, there will be significant disruption as companies struggle to pass on additional duties, especially on low-margin products. Some production might shift to companies with manufacturing facilities in the US, but API procurement will become more expensive, given the limited number of API facilities in the US. Finished product costs will rise, and there could be short-to-mid-term shortages,” the executive said.
India currently has approximately 640–650 USFDA-approved manufacturing sites, though the number of facilities operated by Indian firms in the US remains unclear.
Leading Indian pharmaceutical companies with US manufacturing operations include Sun Pharmaceutical Industries, Cipla, Lupin, and Biocon.
The Nifty Pharma index, which declined sharply in early trade, recovered substantially by the end of the trading session.
Major pharmaceutical stocks remained in the red, with Sun Pharma down 1.38 per cent, Aurobindo Pharma 2.38 per cent, Lupin 1.79 per cent, and Dr. Reddy's Laboratories 2.7 per cent lower.
Abhay Gandhi, CEO (North America Business) of Sun Pharmaceutical Industries, stated during the Q3FY25 analyst call that it remains unclear what form the tariff proposal will take.
“You would also be aware that right now, there are confirmatory hearings on certain key appointees, which haven't fructified. The new appointees have not yet taken over their respective functions. So until we know with certainty about actions being taken, it is difficult for us to plan,” he had said.
On the automobile front, India hardly exports vehicles to the US. Among Indian automakers, Tata Motors' subsidiary Jaguar Land Rover, which exports from the UK, is likely to be affected. Tata Motors Group CFO P B Balaji said in the Q3 earnings call: "The US exports more to the UK than the other way around. Therefore, we need to watch and see how that plays out. There's nothing concrete at this point.”
He acknowledged that new tariffs would pose challenges.
Mahindra & Mahindra (M&M) exports tractors to the US, a segment that has faced challenges over the past three years.
It remains unclear whether tractors will be included in Trump's tariff plans. Tata Motors and M&M shares were down marginally on the BSE on Wednesday.
India, however, exported $6.79 billion worth of auto components to the US in FY24.
Total auto component exports stood at $21.2 billion, while imports amounted to $20.9 billion, including $1.63 billion worth of components from the US.
Vinnie Mehta, director general of the Automotive Component Manufacturers Association of India (ACMA), said the industry is closely monitoring developments related to reciprocal tariffs.
“Competitiveness is relative -- our position will also depend on the tariffs imposed on our competitors. So nothing is clear at this moment as the situation is evolving,” Mehta said.
An executive from the auto component sector told Business Standard, “Yeh sab kehne ki batein hain (these are just statements). Nothing changes until we see formal confirmation.”
He added that tariffs are unlikely to be applied to auto components, as Indian suppliers contribute to US domestic vehicle production.
“In fact, if the US imposes tariffs on vehicle imports rather than components, Indian suppliers could benefit. We need to see the final details,” he said.
With inputs from Deepak Patel
Feature Presentation: Rajesh Alva/Rediff.com
