Indian drug exports get a tariff-free pass in the US

The United States has exempted Indian pharmaceutical exports from its newly announced tariffs, ensuring Indian drugmakers can continue supplying affordable medicines to the American market without additional cost burdens.

The decision comes amid broader tariff measures imposed by the Trump administration, which include a 10% universal tariff on imports and a 26% discounted rate on Indian goods. However, pharmaceuticals remain untouched, reinforcing India’s crucial role in the global supply of generic medicines.

The exemption is particularly significant, as Indian companies supply around 40% of all generic drugs used in the US, according to the US Food and Drug Administration (FDA). Also, the US remains the largest market for Indian pharmaceutical exports, valued at $8.7 billion, while imports from the US into India stand at just $800 million, according to the Pharmaceuticals Export Promotion Council of India (Pharmexcil), government agency for promoting pharmaceutical exports.

Strategic Advantage Over Competitors

By securing tariff exemptions, Indian pharmaceutical companies gain a competitive edge over other Asian exporters, particularly China and Vietnam, whose drug exports face higher duties under the revised US trade policies, experts have said. Data from the US Trade Representative (USTR) indicate that while China’s pharmaceutical exports to the US are subject to additional duties, Indian firms can continue to operate without these cost increases, strengthening their market position.

“This shift not only drives significant cost savings on life-saving medicines but also positions Indian exporters to gain a competitive edge over their Asian counterparts, further strengthening India's leadership in the global pharmaceutical market,” said Bhavin Mukund Mehta, Vice-Chairman of Pharmexcil. Industry experts suggest that India’s role in the global pharmaceutical supply chain will strengthen further as US companies prioritise stable and cost-effective sources for essential drugs.

“Additionally, Indian exports face lower tariffs in the US compared to those from China and Vietnam, with a tariff difference of 7% and 19%, respectively. This not only benefits the pharmaceutical sector but also creates opportunities for India’s telecommunications and textile industries. With 18% of India's total exports directed to the US, evolving trade dynamics could open new avenues for growth,” said Saurabh Agarwal, Tax Partner, EY India.

“While short-term export fluctuations are possible, the broader outlook indicates potential growth for Indian exports, contingent on final trade negotiations with the US. To fully capitalise on these shifts, the Indian government should consider expanding Production Linked Incentive (PLI) schemes to include a wider range of products and extend their duration by two years. This would strengthen domestic industries, encourage investment, and enhance India’s global competitiveness,” he added.

Boost for India’s Global Pharma Leadership

India has long played a significant role in global healthcare, particularly in the generic medicines segment. The country supplies 70% of essential drugs used in the US, including treatments for chronic diseases such as diabetes, cardiovascular conditions, and cancer, according to the Indian Pharmaceutical Alliance (IPA). The recent tariff exemption helps Indian firms maintain stable pricing and ensure uninterrupted access to these medicines in the US.

“India and the US share a strong and growing bilateral trade relationship, with a shared vision to double trade to $500 billion under the Mission 500 initiative. Pharmaceuticals remain a cornerstone of this partnership, as India ensures a steady supply of affordable medicines to the US healthcare system. The tariff exemption highlights the critical role of cost-effective, life-saving generics in public health, economic stability, and national security,” said Sudarshan Jain, Secretary General, IPA.

“The Indian pharmaceutical industry remains committed to advancing shared priorities between both nations—strengthening medicine supply chain resilience and reinforcing national security by ensuring access to affordable medicines for all,” he added.

Moreover, the exemption could lead to further investments in India’s pharmaceutical sector, as companies look to scale up production and expand exports. Industry leaders anticipate that this policy move will encourage Indian firms to explore additional collaborations with US-based healthcare companies and research institutions.

A Win for Indian Pharma and the US Healthcare System

The Trump administration’s broader tariff strategy has been aimed at reducing trade deficits and encouraging domestic manufacturing. While several industries, including electronics, textiles, and automotive components, have been affected by the new tariffs, the decision to exempt pharmaceuticals reflects the importance of Indian generics in the US healthcare system.

The exemption also aligns with US efforts to diversify supply chains away from China, particularly in critical sectors such as healthcare. With rising concerns over supply chain disruptions, particularly in the wake of the Covid-19 pandemic, the US has sought to reduce dependence on a single country for essential medical supplies.

“This exemption can be seen as part of a broader strategy to ensure an uninterrupted supply of essential medicines. It also signals recognition of India’s reliability as a pharmaceutical supplier,” said a senior official from the Union Health Ministry.