The United States’ proposed tariffs on pharmaceutical imports could severely impact Indian drug manufacturers, increasing production costs and reducing competitiveness, according to industry experts. However, the Indian automobile sector is expected to remain largely unaffected, as the US accounts for a small share of India’s auto exports.
Impact on India’s Pharmaceutical Sector
The US is a critical market for Indian pharmaceutical companies, with nearly 40 percent of medical prescriptions in the US in 2022 filled with medicines supplied by Indian firms. The country accounts for roughly a third of India’s total pharmaceutical exports, making it a key trading partner.
According to Arvind Sharma, Partner at Shardul Amarchand Mangaldas & Co, the US has historically relied on imports to meet domestic pharmaceutical demand.
“If the US imposes substantial tariffs on Indian pharmaceutical imports, the Indian pharma sector could face significant disruptions, affecting both domestic sales and exports,” Sharma stated.
India currently levies a 10 percent import duty on American drugs, while the US does not impose duties on Indian pharmaceutical imports. A sudden tariff increase could:
- Raise the cost of Indian medicines in the US, making them less competitive against products from other markets.
- Increase domestic healthcare costs in the US, leading to higher consumer prices and restricted access to affordable medicines.
- Encourage Indian pharmaceutical companies to diversify exports, potentially shifting focus toward Europe, Latin America, or Africa.
Industry sources estimate that generic drugs from Indian firms saved the US healthcare system $219 billion in 2022 and over $1.3 trillion between 2013 and 2022. Over the next five years, these savings are expected to reach another $1.3 trillion, underlining India’s crucial role in affordable healthcare.
Also read: AI in Healthcare to Add $30B to India’s GDP by 2025
Minimal Impact on India’s Automobile Sector
The proposed reciprocal tariffs are unlikely to significantly affect India’s auto sector, according to Shashi Mathews, Partner at IndusLaw.
“While India’s high import duties on automobiles have been a point of contention for the US, a reciprocal tariff would not have a significant impact, as the US is a relatively smaller market for Indian automotive exports,” Mathews explained.
India has taken steps toward reducing duties on high-end motorcycles, but bringing tariffs down to zero remains unlikely, as it would not align with domestic industry protection policies.
While the automotive components market could see some impact, industry analysts believe India’s broader export markets will help absorb any potential tariff-related disruptions.
Trade Relations and Future Outlook
US President Donald Trump recently announced that the new reciprocal tariffs will take effect on April 2, targeting countries with high import duties on US products, including India.
As discussions between the two nations continue, experts suggest that India may seek to reduce dependency on US markets in affected sectors while exploring alternative trade strategies to mitigate risks. The pharmaceutical industry is expected to push for greater diversification, while the automobile sector remains largely insulated from the impact of these tariffs.
