India Pharma Outlook Team | Thursday, 31 July 2025
The much-proposed 25% general tariff, which US President Donald Trump revealed on August 1, 2025, will exempt Indian drug exports to the US. But the mood is far from festive. The uncertainty still remains and the likelihood of pharma-specific tariffs is still on the cards.
Drug and active pharmaceutical ingredient (API) formulations are exempt from the new tariff today, as decided in the mutual tariff agreement made in April 2025. "Pharmaceuticals were specifically exempted in that deal," stated Maitri Sheth, Equity Research Analyst – Pharma Sector, Choice Broking.
In spite of this exception, Sheth warned that the current Section 232 probe of pharma imports is a medium-term risk. "There is a likelihood of pharma-specific tariffs to be announced within a few weeks or months," she noted, noting that the rate and scope uncertainty makes it hard to gauge the full import of the implications for Indian pharma makers.
Also Read: Merck Launches $3 Billion Global Cost-Cutting Plan
The US is also the biggest Indian generic market, with exports of approximately $8.73 billion in 2024—about 31% of India's pharma exports. Indian companies provide virtually half the generic drugs covered under US federal medical care and commercial programs.
While the big players with US-based production are likely to be shielded, others are considering portfolio realignments and reconfiguration of production. With lean EBITDA margins of 5–15% for base generics business, even a 10% tariff will be a credible threat if prices cannot be passed on to customers.
In spite of that, Sheth feels the cost sensitivity and Indian generics dependence of the US healthcare system make strong arguments against rash tariff moves.
