Even if the US exempts generic drugmakers from this rule, the danger lies in future creep, as it could later be applied to complex generics and biologics
United States President Donald Trump’s announcement to levy a 100 per cent tariff on branded or patented pharmaceutical imports — unless the maker is actively building a facility in the United States — shows his mercantile thought process and marks yet another turn in global trade tensions.
While the restrictions were presented as an attempt to achieve self-reliance in US pharmaceutical manufacturing, this move threatens to upend the global drug industry, which relies heavily on Indian pharmaceutical companies for unbranded generics. Though the US President did not specifically mention generic drugs in his announcement, the White House refused to provide clarity, sending Indian pharma stocks into a tailspin.
The US is by far the biggest export market for Indian drugmakers. However, India accounts for barely five per cent of global pharma exports to the US. Ireland was the top pharma exporter to the US with a 30 per cent share, followed by Switzerland at 8.8 per cent. India barely made it to the top five with a five per cent market share in the US pharma market.
Though India’s share in pharma exports is low, the US market is dominated by low-cost generic medicines, formulations and active pharmaceutical ingredients (APIs). In fiscal 2024-25, India’s global pharma exports exceeded $30 billion, rising by over nine per cent from the previous year.
Even if the US exempts generic drugmakers from this rule, the danger lies in future creep, as it could later be applied to complex generics and biologics. Margins in generic drug manufacturing are notoriously thin. Any tariff on generics will have a disastrous effect on the US health system, as drugmakers will pass on the burden, ultimately affecting American patients.
Trump offered exemptions from pharma tariffs if a company has started or is constructing its manufacturing facility in the United States. This rule, therefore, could convince cash-rich pharma companies from Europe to build their physical base in America. The infrastructure alone, however, cannot bring back manufacturing to the United States. America can never offer a competitive edge to companies in view of high labour costs and the strong dollar — a logic that the New York real estate mogul in the White House seems to miss.
Coming merely days after a decision to make new H1B visa applications almost impossible through a steep new fee, Trump’s move complicates India-US relations, as both measures affect Indian sensibilities and employers.
Both these decisions, coupled with slapping India with the highest 50 per cent tariff, will impair goodwill between the two major democracies and affect growing people-to-people contacts. Unless these decisions harm the interests of common Americans, no future US administration could reverse them.
While an India-US bilateral trade agreement could provide some relief to Indian businesses, it is high time that Indians learn from their past experiences and expand their operations in Africa, Latin America and Asean. To survive in the global market, Indian businesses should focus on innovation and excel in their product offerings, as the era of the famous jugaad is over.
