K SRINIVASAN
As US-China trade tensions escalate, global supply chains are bracing for fresh shocks. Pharmaceuticals stand at the centre of this storm, and India finds itself both as a potential beneficiary and at collateral risk. The US government’s 90-day reprieve on reciprocal tariffs for pharmaceutical imports has offered temporary relief to Indian drug makers. Now, expectations are rising that a full exemption may follow, much like those extended to certain electronic goods.
Industry leaders believe the US, having acknowledged its dependence on imported electronics, will soon recognise its vulnerability in healthcare. “Washington cannot sustain its healthcare system without imported generics, particularly from India. It’s only a matter of time before a full tariff exemption follows,” said a senior official from a leading Indian pharma association.
The numbers back this optimism. Generics account for nearly 80 per cent of the US pharmaceutical market, and Indian firms supply 47 per cent of that segment. Replacing these imports with domestic production would push costs up by 30-40 per cent and take at least four years to build sufficient capacity, experts say.
For India’s drug makers, the American market is critical. Nearly 30 per cent of their total export earnings come from the US, making it their largest overseas destination.
At present, Indian pharmaceutical exports to the US attract zero tariffs, while India levies minimal duties of up to 7.5 per cent on American medicines. New tariffs could seriously disrupt these flows. “If fresh tariffs raise costs, it may no longer be viable for Indian firms to sell certain products in the US Other markets like Europe and Latin America, where pricing power is stronger, could then look more attractive,” an analyst noted.
Initially, the US spared pharmaceuticals from its reciprocal tariff list, but the Trump Administration later hinted at possible duties. “Pharma tariffs are going to come in at levels you haven’t seen before. We’re reviewing pharmaceuticals as a distinct category,” Trump had warned.
Yet, amid this uncertainty lies a strategic opening. Should Washington impose high tariffs on Chinese pharmaceutical imports — both finished drugs and active pharmaceutical ingredients (APIs) — China’s presence in the US market would shrink, creating space for Indian suppliers.
However, optimism comes with caution. First, India’s pharma industry depends heavily on China for APIs — the key ingredients used in drug manufacturing. Around 60- 70 per cent of India’s API requirements are met through imports from China. If US tariffs on Chinese APIs disrupt supplies or if China retaliates, Indian production costs could rise, affecting competitiveness.
Second, regulatory hurdles remain high. The US Food and Drug Administration (FDA) has tightened inspections and compliance standards for overseas suppliers. Only Indian firms with FDA-approved facilities and clean track records will be able to respond swiftly. Others may struggle to scale up in time.
Third, pricing pressure in the US pharmaceutical market is relentless. Big pharmacy benefit managers (PBMs) and hospital networks aggressively negotiate lower prices, squeezing supplier margins. While Indian companies might expand volumes, sustaining profitability under such pressure will be challenging.
Fourth, a long-term geopolitical risk persists. Although the US cannot replace imports overnight, it is promoting domestic pharmaceutical manufacturing as part of its economic security strategy. This could eventually limit India’s share expansion in the American market.
Despite these risks, major Indian pharma companies such as Sun Pharma, Dr. Reddy’s Laboratories, Cipla, Lupin, and Aurobindo Pharma appear well placed to gain. With strong US generics portfolios and FDA-cleared plants, these companies could benefit disproportionately if Chinese competition fades. To secure this advantage, India must urgently address its overdependence on Chinese APIs, an exposure repeatedly flagged by industry experts and policymakers. A senior Commerce Ministry official acknowledged the vulnerability, saying, “We’re preparing contingency plans, including fast-tracking domestic API production projects and seeking tariff exemptions for Indian drugs where needed.”
Health policy experts, meanwhile, caution against weaponising public health as a tool for trade disputes. “Tariffs on essential medicines or their ingredients, no matter the target country, risk medicine shortages, price hikes, and harm to patients globally,” warned Dr. Ramesh Nair, a Mumbai-based health policy analyst.
India’s pharma sector, thus, stands at a delicate juncture. The brewing tariff war offers a valuable opportunity for Indian drug makers to consolidate their position in the US generics market, especially if Chinese exports are curtailed. Yet, the scale of gains will hinge on how swiftly India mitigates API supply risks, navigates US regulatory processes, maintains competitive pricing, and accelerates domestic bulk drug production through initiatives like the Production-Linked Incentive (PLI) scheme.
As global trade disputes increasingly overlap with public health security concerns, India’s pharmaceutical industry faces both a promising opportunity and a strategic challenge. The coming months will reveal whether it can convert this moment of geopolitical flux into lasting market advantage.
