Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
U.S. President Donald Trump’s recent decision to impose 100% tariffs on patented, branded drugs is anticipated to have a limited direct impact on India’s pharmaceutical industry. This is primarily because most Indian drugmakers predominantly export generic pharmaceutical drugs to the U.S. Despite this, shares of leading Indian drugmakers experienced declines on Friday, reflecting investor concerns over potential escalations in U.S.-India trade tensions.
Tariff Impact and Market Reaction
While the new tariffs specifically target branded and patented drugs, a segment where Indian companies have minimal presence in the U.S. market, the Nifty Pharma Index fell by over 2%. Individual stocks like Sun Pharmaceutical and Divi’s Laboratories saw drops of 2.5% and 3.5% respectively. Sudarshan Jain, an official at the Indian Pharmaceutical Alliance, affirmed to CNBC that the direct impact on Indian generic drug exports would likely be minimal.
Ayush Abhijeet, director of investments at White Oak Capital Partners, suggested that investor jitters stem from a broader sequence of events over recent months. He noted that global market participants are observing a “ratcheting of challenges to the India economy,” which includes various tariffs and visa fee hikes.
Broader Trade Tensions
The 100% tariffs on patented drugs follow a series of other measures implemented by the U.S. against India. The U.S. initially imposed 25% tariffs on India in August, subsequently increasing them to 50%. These earlier tariffs were reportedly influenced by India’s purchase of Russian oil, with White House trade advisor Peter Navarro referring to Russia’s war in Ukraine as “Modi’s war.”
Additional Measures
Exporters of textiles, gems and jewelry, and marine products in India have been among those most affected by these previous tariffs. However, given that India’s economy is largely driven by private consumption, the overall impact of these tariffs has been limited. Furthermore, President Trump recently imposed a “one-time” fee of $100,000 on new H-1B visa applications, a move that could disproportionately affect Indian workers.
Experts speaking to CNBC indicated that these rapid-fire announcements are making investors apprehensive, fearing further escalations from Washington. Gyanendra Tripathi, a partner at risk advisory firm BDO Partners, suggested that these successive moves by the U.S. could be a negotiation tactic aimed at securing a quicker trade deal with India.
Outlook for Indian Pharma
Despite the current anxieties, some analysts remain optimistic about India’s generic pharmaceutical sector. White Oak’s Abhijeet highlighted India’s competitive edge in generic pharma, unlike in textiles where Indian products can be readily substituted by exports from countries like Bangladesh or Vietnam.
Abhijeet stated that even if the U.S. were to impose tariffs on Indian generic pharma, he would not be overly concerned. He reasoned that generic pharma exporters are competitive and have few substitutes, suggesting that a significant portion of any such tariffs would likely be passed on to end-customers.
