Trump Tariff Threat Is Pushing India's Pharma Industry To Reassess The China Equation

While the proposed duties would not take effect until August 2028, the announcement has triggered fresh debate over whether the world's largest supplier of affordable generic medicines can continue relying on the US as its biggest export market or whether the industry must accelerate diversification, expand overseas manufacturing, and reduce its own dependence on Chinese raw materials.

The proposal, unveiled on July 21, gives pharmaceutical companies two years to establish manufacturing facilities in the US. Imported generic medicines will remain duty-free until August 1, 2028, after which they would face a 100% tariff for one year before rising to 200% from August 2029 (unless production is relocated to the US).

Trump's Pharma Tariff

The announcement completes Trump's pharmaceutical tariff agenda, extending his reshoring campaign from patented medicines and pharmaceutical ingredients to generic drugs—the foundation of the US healthcare system.

For India, the implications are substantial.

According to the Global Trade Research Initiative (GTRI), India exported pharmaceutical products worth US$25.8 billion in 2025, with shipments to the US totalling US$9.74 billion, or 37.7% of the total exports. Indian manufacturers also account for nearly 47% of all generic prescriptions dispensed in the US, making the country the largest supplier of low-cost medicines to the US market.

Unlike previous tariff actions affecting specific sectors, the latest proposal directly targets one of India's highest-value manufacturing industries and one of the few sectors where the country enjoys global scale and technological competitiveness.

Industry executives and analysts believe the announcement should be viewed less as an immediate earnings risk and more as the beginning of a structural transformation in global pharmaceutical manufacturing.

Exporters Feel The Heat

"The proposed U.S. tariffs on pharmaceutical generics, effective August 2028, could impact the business risk profiles of Indian pharmaceutical exporters, given that the US accounts for nearly one-third of India's pharmaceutical exports, predominantly generics," said Anuj Sethi, Senior Director at Crisil Ratings, further adding that, "Several structural strengths provide support. Firstly, the US is heavily reliant on imported generics, with Indian manufacturers supplying about 40% of its demand. This may enable the pass-through of a portion of tariff-related cost increases across the value chain. Secondly, the two-year implementation window provides companies an opportunity to adapt their supply chains. Lastly, the final tariff structure and the outcome of India-US trade negotiations continue to evolve and therefore warrant close monitoring."

"Nevertheless, the credit profiles of Indian pharmaceutical companies are expected to remain stable, supported by their strong balance sheets," Sethi added.

Mutually Beneficial Ties

His assessment reflects a broader view across the sector that while tariffs would raise costs, they are unlikely to dismantle India's dominant position overnight because of the US's continued dependence on imported generics.

India's pharmaceutical industry has responded cautiously, emphasising that the relationship between the two countries extends well beyond exports.

"We are continuously engaged with the US government, and economic sustainability will be the critical factor to decide the manufacturing," said Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance (IPA), and added, "India has been a trusted partner in ensuring the supply of affordable and quality-assured medicines for American patients. Leading Indian pharmaceutical companies have a US presence with over 40 facilities, supporting American jobs, investing in manufacturing, research and resilient supply chains. IPA will continue to engage with the US administration to build a stronger partnership and further strengthen health and medicine security for both countries."

Strengthened Ecosystem

The statement underscores an argument repeatedly made by Indian drugmakers—that the industry is already deeply embedded in the US pharmaceutical ecosystem through manufacturing, research, employment, and investment, with Indian companies having invested an estimated $20 billion in the country.

Dr. Reddy's Laboratories CEO Erez Israeli has, however, questioned the feasibility of relocating production within the proposed timeline. "It’s not practical to move operations like that to the US overnight. If tariffs are imposed, we will have to raise prices," he said, adding that policy positions could still evolve and the company was not planning immediate operational changes.

Granules India Executive Director Priyanka Chigurupati has said that the company's three US manufacturing facilities position it well to expand domestic production if needed, but warned that higher generic drug prices would ripple through the healthcare system and ultimately affect patient affordability.

Pharmexcil Chairman Namit Joshi has argued that reshoring the generic medicines ecosystem would be far more complicated than relocating a handful of manufacturing plants. "Shifting the entire generics manufacturing ecosystem from India to the US remains a distant prospect," he said, adding that, "Generics account for 90% of all US prescriptions, yet they contribute only around 13% of total prescription drug spending by value."

He highlighted that even if formulation plants were established in the US, the industry would continue importing active pharmaceutical ingredients because the US lacks adequate API manufacturing capacity. "For these reasons, a full-scale reshoring of the generic pharmaceutical ecosystem to the US is not achievable within a two-year timeframe," he pointed out.

The China Factor

The tariff proposal also exposes vulnerabilities within India's own pharmaceutical model.

GTRI Founder Ajay Srivastava argues that while the industry is focused on Washington's tariff threat, its larger strategic risk lies elsewhere: its heavy dependence on China for pharmaceutical raw materials.

Around 70% of India's chemical-based active pharmaceutical ingredients (API) and nearly 90% of biologic inputs continue to come from China. Any disruption in those supplies could prove more damaging than US tariffs.

Srivastava argues that rebuilding India's domestic API manufacturing base should become a national industrial priority while companies simultaneously diversify exports toward Europe, Latin America, Africa, and Asia, instead of relying disproportionately on the US market.

The two-year transition period provides Indian companies with time to adapt, but it also creates uncertainty.

Executives are expected to reassess capital allocation, expand manufacturing selectively in the US for higher-value products, strengthen alternative export markets, and accelerate investments in complex generics, biosimilars, and speciality medicines that are less vulnerable to price competition.

The Balancing Act

For Washington, the challenge will be balancing industrial policy with healthcare affordability. Generic medicines account for roughly 90% of prescriptions filled in the US because they keep healthcare costs low. Any significant disruption to imports from India risks increasing drug prices for insurers, hospitals, and patients.

Whether Trump's proposal ultimately survives trade negotiations or undergoes revisions, analysts say it has already achieved one objective: forcing the global pharmaceutical industry to begin rethinking where the next generation of medicines will be manufactured.

For India, the issue is no longer merely about defending exports. It is about preserving its position as the world's pharmacy while adapting to a global trading system where resilience, geopolitics, and supply-chain security are becoming as important as cost competitiveness.