Trump probes pharmaceutical imports ahead of tariff: Will India be impacted?

Donald Trump’s administration is probing imports of pharmaceuticals and semiconductors as he plans to impose tariffs on the sectors on the grounds of an extensive reliance on foreign production of medicine and chips. 

These investigations, announced on April 1, are being conducted under Section 232 of the Trade Expansion Act of 1962, allowing tariffs to enhance domestic manufacturing of critical goods. 

When Trump announced the tariffs on April 2, pharma and semiconductor sectors heaved a sigh of relief as they were skipped, unlike the automobile sector that was tariffed at 25 per cent. Now, pharmaceutical and semiconductor sectors are expecting tariffs ranging between 10-25 per cent. 

Trump, during the National Republican Congressional Committee dinner, announced that the US would announce “very shortly a major tariff on pharmaceuticals”, dangling a sword on the sector. 

The tariffs on pharmaceuticals is expected to impact India, as it is one of the biggest drugs and pharmaceuticals producers in the world in terms of volume. It is the largest global supplier of generic medicines and fulfills 20 per cent of the global generic drugs demand, close to 50 per cent of Africa’s and 40 per cent of US generics demand. While India exports to around 200 countries, USA, Belgium, South Africa, the UK, and Brazil are the top-most importers.

India’s drug and pharmaceutical exports increased by 8.36 per cent from $2.13 billion in July 2023 to $2.31 billion in July 2024, as per the Ministry of Chemicals and Fertilizers. It projected India’s pharmaceutical sector to reach $100 billion this year. 

According to a February report by Bain & Company, the pharmaceutical industry is the fifth-largest contributor to India’s manufacturing GVA. As per the report, India’s pharmaceutical exports are projected to grow 10- to 15-fold, reaching nearly $350 billion by 2047, it said.

India’s pharma network includes more than 10,000 manufacturing facilities, over 3,000 pharma companies and 650 USFDA-compliant pharma plants, which is the highest number outside of the US.

Meanwhile, pharmaceutical companies are lobbying for a gradual implementation of tariffs to mitigate impact and allow time for production adjustments. Concerns are rising around potential drug shortages and reduction in access, as companies with extensive global operations face significant challenges in relocating production to the US.