Pharma Exports Exempted from Trump Tariff: Why It's a Relief for Indian Cos

The tariff exemption granted by US President Donald Trump has provided relief to the Indian pharmaceutical sector, one of the country's largest exporting industries. The Nifty Pharma index jumped about 2.66% in early trade. 

"Pharmaceuticals have been exempted from tariffs. The decision underscores the critical role of cost-effective, life-saving generic medicines in public health, economic stability, and national security," said Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance (IPA). 

Earlier, a Kotak Institutional Equities report noted that India’s pharma exports to the US stood at $8.1 billion as of FY24. In contrast, according to the Ministry of Commerce, imports from the US to India amounted to about $400 million. Currently, no import duty is levied on Indian drugs supplied to the US, whereas India imposes an average import duty of about 5-10% on pharmaceuticals imported from the US. 

"If tariffs are levied strictly on the principle of reciprocity within the pharma sector, the Indian government will have to navigate the impact of lower customs duties, estimated at less than $50 million," the report dated March 24 stated. 

At 11 AM, all Nifty Pharma constituents were trading in the green, with Gland Pharma up 4.1%, Lupin up 3%, Sun Pharma up 3.81%, Natco Pharma up 3.79%, and Aurobindo Pharma up 2.95%. 

Divi's Laboratories were up 2.02%, Dr. Reddy's Laboratories rose 2.04%, Zydus Lifesciences gained 2.33%, and Ipca Laboratories surged 4.17%. 

Why Were Pharma Exports Exempted? 

According to the White House's official website, certain goods are not subject to the Reciprocal Tariff, which starts at 10% and varies by country. India is facing a 27% "discounted" Reciprocal Tariff. 

"Some goods will not be subject to the Reciprocal Tariff. These include: (1) articles subject to 50 USC 1702(b); (2) steel/aluminum articles and autos/auto parts already subject to Section 232 tariffs; (3) copper, pharmaceuticals, semiconductors, and lumber articles; (4) all articles that may become subject to future Section 232 tariffs; (5) bullion; and (6) energy and other certain minerals that are not available in the United States," the White House stated in a fact sheet on Reciprocal Tariffs. 

An earlier report by Emkay Global noted that India is the largest exporter of generic drugs globally, accounting for 47% of US generic imports by volume. Despite contributing only 6% ($12.5 billion) to the US's $212 billion pharma imports in CY24, India's low-cost, high-volume generic exports make it an indispensable supplier for the US market, which receives 37% of India's pharma exports. 

"Given the importance of Indian generics for the US pharma industry, any tariff imposition would be detrimental to US consumers—a point that India needs to forcefully communicate to the US administration," the Emkay Global report stated.