- India,
- 27-Aug-2025 04:24 PM IST
India-US Tariff War: The United States has imposed an additional 25% tariff on India in response to its purchase of Russian oil, which is now in effect. However, on a critical front, U.S. President Donald Trump has made a concession by exempting Indian pharmaceuticals from this tariff. The primary reason is the crucial role Indian generic medicines play in the U.S. healthcare system. This article analyzes the reasons, impacts, and the status of India’s pharmaceutical industry in light of this decision.
Role of Indian Medicines in the U.S.
Indian generic medicines are vital in providing affordable healthcare in the U.S. Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance, told ANI that the Indian pharmaceutical sector was exempted from immediate tariffs because generics are “essential” to maintaining low-cost healthcare in the U.S. These medicines operate on low profit margins, making their continuous availability critical for patients.
According to Sandeep Pandey, Co-founder of Basava Capital, India’s share in U.S. pharmaceutical imports is about 6%. After the potential imposition of a 50% tariff on August 27, 2025, Indian exporters had begun shifting shipments to Australia, threatening the stability of the U.S. Medicare system. This led Trump to exclude Indian drugs from tariffs. In FY2025, India exported nearly 40% of its total pharmaceutical exports to the U.S.
U.S. Pharmaceutical Imports at a Glance
The U.S. imports medicines from multiple countries. The following table presents 2021 and 2024 data:
| Country | 2021 Imports ($ million) | 2024 Imports ($ million) | 2021 Share | 2024 Share | Growth (%) |
|---|---|---|---|---|---|
| Ireland | 6,472 | 9,784 | 33.4% | 39.8% | 14.8 |
| Switzerland | 21,066 | 18,858 | 14.2% | 8.9% | -3.6 |
| Germany | 22,021 | 17,164 | 14.8% | 8.1% | -8.0 |
| Singapore | 5,738 | 15,253 | 3.9% | 7.2% | 38.5 |
| India | 8,908 | 12,471 | 6.0% | 5.9% | 11.9 |
| Belgium | 7,208 | 12,298 | 4.8% | 5.8% | 19.5 |
| Italy | 5,702 | 11,532 | 3.8% | 5.4% | 26.5 |
| China | 3,344 | 7,825 | 2.2% | 3.7% | 32.8 |
| Japan | 5,972 | 7,476 | 4.0% | 3.5% | 7.8 |
| U.K. | 6,070 | 7,269 | 4.1% | 3.4% | 6.2 |
| Total | 148,731 | 211,798 | 100% | 100% | 12.5 |
Experts suggest that the U.S. depends on India for nearly half of its generic drug supply. Given the already high healthcare costs in the U.S., the likelihood of imposing heavy tariffs on drugs immediately remains low.
Possible Impact if Tariffs Were Imposed
According to Kotak Institutional Equities, if drug tariffs had not been rolled back, Indian companies might have had to sharply cut their U.S. portfolios or even exit the market entirely. With already thin margins and falling prices in generics, companies would have been forced to stop sales or pass on higher costs to patients.
Additionally, setting up manufacturing facilities in the U.S. is both costly and time-consuming, making it impractical for Indian firms. They might have had to pursue more aggressive strategies in India and European/ROW markets, potentially intensifying price competition.
India’s Pharma Exports
India exports pharmaceuticals to several countries. The table below shows FY2022 and FY2025 data:
| Country | FY2022 Exports ($ million) | FY2025 Exports ($ million) | FY2022 Share | FY2025 Share | Growth (%) |
|---|---|---|---|---|---|
| U.S. | 6,472 | 9,784 | 33.4% | 39.8% | 14.8 |
| U.K. | 615 | 781 | 3.2% | 3.2% | 8.3 |
| South Africa | 550 | 637 | 2.8% | 2.6% | 5.0 |
| France | 413 | 586 | 2.1% | 2.4% | 12.3 |
| Canada | 355 | 540 | 1.8% | 2.2% | 15.0 |
| Brazil | 375 | 520 | 1.9% | 2.1% | 11.6 |
| Nigeria | 509 | 468 | 2.6% | 1.9% | -2.8 |
| Australia | 358 | 433 | 1.8% | 1.8% | 6.6 |
| Netherlands | 327 | 423 | 1.7% | 1.7% | 9.0 |
| Russia | 480 | 421 | 2.5% | 1.7% | -4.2 |
| Total | 19,396 | 24,577 | 100% | 100% | 8.1 |
Impacted Indian Companies
According to Jefferies, generic drug makers and Contract Manufacturing Organizations (CMOs) may face severe challenges from tariffs due to high dependence on U.S. sales and pricing pressures. Key affected companies include:
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Zydus Lifesciences: 45% of revenue from the U.S., primarily from Oral Solid Dosage (OSD) formulations.
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Dr. Reddy’s Laboratories: 43% revenue from the U.S., largely from injectable drugs.
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Gland Pharma: 54% revenue from the U.S., including manufacturing as a CMO.
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Biocon: 50% revenue from the U.S., with less than 30% direct exports of generics, but still vulnerable to rising costs.