The global trade chessboard has shifted again and India’s pharma sector may be standing on the fault line. In a recent development that stunned policymakers and market participants, the U.S. President Donald Trump announced a 25% tariff on Indian exports, effective August 1.
While several sectors are already feeling the pressure, pharma companies long considered India’s crown jewel in exports are now bracing for what may come next.
Trump tariff: Pharma in the line of fire?
While the new tariffs did not explicitly include pharmaceuticals, the industry’s close connection with U.S. trade has put it under a cloud of uncertainty.
India is one of the world’s largest suppliers of generic medicines to the U.S., with exports rising sharply from $8.1 billion in FY24 to $9.8 billion in FY25, a 21% jump.
As of the latest, the U.S. now accounts for 40% of India’s pharma exports. This makes it the single largest overseas market for Indian drugmakers. But again, that dependence also in a way creates vulnerability.
As of the latest, with these developments, many fear that if trade tension escalates or if India’s defence and energy ties with Russia trigger additional penalties, pharma could be next on the list.
Trump tariff: How are pharma stocks reacting?
On the day after the announcement, the Nifty Pharma index fell nearly 1% in early trade, with several stocks in the red.
As of the latest, Zydus Life is down over 2%. IPCA Labs, Lupin, Granules, JB Chemicals, Dr Reddy’s all slipped among other stocks in the list. Aurobindo Pharma is up 1%, bucking the trend and Mankind Pharma traded marginally higher in the early hours.
Nomura’s take: A warning with a window
The brokerage firm Nomura flagged that India’s pharma sector, while currently exempt, remains exposed. “With this announcement, we estimate India’s effective tariff rate as closer to 20%, lower than the 25% announced by the US. Sectors under ongoing Section 232 investigation (pharmaceuticals, semiconductors & electronics, among others) are currently exempt from reciprocal tariffs,” the report noted.
However, they added a word of caution. “We had assumed a baseline reciprocal tariff of ~10% on India, so if tariffs sustain at 25%, then this would hit GDP growth by adversely affecting exports to the US, eroding any benefits due to trade diversion, hurting profit margins and reducing investments, and leading to job losses for MSMEs.”
The brokerage further warned, “The US is India’s largest export destination, accounting for ~18% of total exports and ~2.2% of GDP… For a number of sectors, the exports to the US account for ~30–40% of India’s global exports of that product category, underlining the sensitivity of overall export and industrial output growth to access to the US market.”
Why this matters for Pharma
If additional penalties are imposed particularly in retaliation to India’s Russia dealings, pharma could face:
- Tariff hikes that raise cost for U.S. buyers
- Profit margin pressure due to inability to pass on costs
- Volume hit, if buyers shift to alternative markets
- IP-related roadblocks, as U.S. regulators and buyers get more stringent
Moreover, even without direct tariffs, a weaker rupee and trade-linked volatility may spook foreign investors, adding pressure on pharma valuations.