US Sets Two-Year Deadline Before Imposing Up To 200% Tariffs On Generic Drug Imports

US President Donald Trump on Tuesday unveiled a phased tariff plan for imported generic medicines, giving manufacturers a two-year tariff-free window before imposing duties of 100% for one year and 200% thereafter as part of a broader effort to shift pharmaceutical manufacturing to the United States.

Under the new policy, generic medicines imported into the US will continue to attract zero tariffs for two years from August 1. Thereafter, imports will face a 100% tariff for one year, followed by a 200% levy.

Trump said the phased structure is intended to encourage pharmaceutical companies to establish manufacturing facilities in the US rather than rely on overseas production. Companies that fail to localise manufacturing within the transition period would eventually face steep import duties, reinforcing the administration's broader "America First" manufacturing agenda.

The announcement offers temporary relief to Indian pharmaceutical companies, which derive a significant share of their revenue from the US generic medicines market. However, the proposed tariff escalation could significantly alter the economics of exporting generic medicines to the US if companies do not expand their manufacturing footprint there.

Indian Drugmakers Get Temporary Breathing Space

India is among the largest suppliers of affordable generic medicines to the US, with companies including Sun Pharma, Dr Reddy's Laboratories, Cipla, Lupin, Aurobindo Pharma and Zydus Lifesciences having an extensive presence in the market.

The two-year transition period gives exporters additional time to reassess supply chains and manufacturing strategies before the proposed tariffs take effect.

Trump said the phased tariff structure is intended to encourage pharmaceutical companies to build manufacturing facilities and related infrastructure in the US. Companies that fail to localise production would eventually face steep import duties under the administration's broader "America First" manufacturing strategy.

The announcement also complements the administration's broader efforts to reduce dependence on overseas pharmaceutical manufacturing while pursuing its most-favoured-nation drug pricing policy for medicines sold in the US.

According to the US Food and Drug Administration, generic medicines account for more than 90% of prescriptions dispensed in the country, making the segment a key export market for Indian pharmaceutical companies.

Industry executives have said India's cost-efficient manufacturing ecosystem remains globally competitive, but sustained tariff barriers could encourage companies to expand manufacturing capacity in the US or increase contract manufacturing partnerships to retain access to the market.

Pharma Stocks Decline

The announcement weighed on Indian pharmaceutical stocks. The Nifty Pharma index fell nearly 2%, making it the worst-performing sectoral index on the NSE in early trade. Shares of Sun Pharma, Cipla and Dr Reddy's Laboratories were among the top losers on the Nifty 50 as investors assessed the potential long-term impact of the proposed tariffs.

At around 9:16 a.m. IST, the Nifty Pharma index was down 1.7% at 25,650.10.

The broader market also traded lower, with the Sensex falling 390.62 points, or 0.5%, to 77,079.49, while the Nifty 50 declined 100.95 points, or 0.42%, to 24,086.75.

While the immediate impact on Indian exports is expected to be limited because of the two-year exemption, the proposed increase to 100% and later 200% tariffs is likely to remain a key overhang for Indian pharmaceutical companies as they evaluate future manufacturing and investment plans.