US President Donald Trump has proposed a phased-in tariff on generic medicines imported from abroad, a policy that could threaten $9.7 billion in pharmaceutical exports from India. The announcement targets the world’s largest exporter of generic drugs, potentially upending a supply chain that currently provides nearly 40% of the medicines consumed in the United States.
The proposed arrangement begins with a two-year grace period starting August 1. After that, tariffs are set to jump to 100% in 2028 and increase to 200% the following year. The stated goal is to incentivize manufacturers to build production facilities within the United States and bring drug manufacturing back to American soil.
India exported $9.7 billion worth of pharmaceutical drugs to the US last year. The report notes that the impact of this move will vary across different product categories, but the financial stakes are significant for the industry.
Major Indian drug companies like Sun Pharma, Zydus Lifesciences, Dr Reddy’s Laboratories, Cipla, Lupin, and Aurobindo already operate manufacturing plants in the US. However, industry sources indicate that moving entire production lines to American soil would be expensive for many firms. This cost is partly driven by the fact that these drugs are sold with narrow profit margins, leaving little room for the significant investment required to relocate operations.
Another complication involves the supply chain for active ingredients. The Times of India reports that about 70% of active pharmaceutical ingredients and 90% of biologic inputs currently come from China. This reliance on Chinese raw materials means that even if Indian companies build plants in the US, they might still depend on Chinese suppliers for the materials needed to produce the drugs.
The announcement caused immediate volatility in the Indian stock market. Stocks of Indian drug-makers were hit hard by the news, triggering a sell-off in the Nifty Pharma index. The broader Sensex fell by 700 points, dropping below the 24,000 mark as investors reacted to the potential disruption to the sector’s revenue streams.
The proposed tariffs force a difficult choice for generic manufacturers: invest billions in building domestic capacity in the US or face a drastic increase in costs that could make their exports uncompetitive. While the administration has pushed for domestic production, the logistical and financial hurdles—particularly regarding raw material sourcing—create a complex path forward for the industry. For those tracking the broader shift in global commerce, green energy transport firms face similar supply chain challenges.
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