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With the US President Donald Trump threatening imposition of a 25% tariff on goods exported to the United States from August 1, the pharmaceutical industry in the country is looking at any potential impacts of any higher tariffs on exports to one of its largest destinations.
The Government of India has said that it is studying the implications of the statement by the US President.
Trump, in a statement on his social media network Truth Social, on July 30, alleged that India has kept its trade barriers high and buys military equipment, and energy from Russia, "while everyone wants Russia to stop the killing in Ukraine".
He went out in all caps letters that it is not good, and "India will therefore be paying a tariff of 25% plus a penalty for the above, starting on August first..."
"Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non-monetary Trade Barriers of any Country," it said.
Trump earlier threatened the country with a proposed tariff of up to 200% on pharmaceutical imports from India to US, according to reports.
Over one-third of the pharma exports from the country is to US, and any such significant tariff hike may have an impact on the Indian exports. The exports of drug formulations and biologicals to US during the year 2024-25 amounted to almost 40% at $9.7 billion out of the overall exports of $24.15 billion.
The Union ministry of commerce and industry has said, "India and the US have been engaged in negotiations on concluding a fair, balanced and mutually beneficial bilateral trade agreement over the last few months. We remain committed to that objective."
"The Government attaches the utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, and MSMEs. The government will take all steps necessary to secure our national interest, as has been the case with other trade agreements including the latest Comprehensive Economic and Trade Agreement with the UK," it added in a statement.
The threat has been looming from the time the US President started imposing reciprocal tariffs on various products imported from various countries, including from India. Besides, the US Commerce Department has launched an investigation into the national security implications of higher imports of pharmaceutical products.
The US Trade Representative (USTR) has placed India on its Priority Watch List once again on its 2025 Special 301 Report citing the ongoing concerns about the intellectual property rights (IPR) protection and enforcement, which has been another concern for the Indian manufacturers targeting the US market.
This comes amidst the growing share of Indian exports to the US market. According to a blog by financial services firm AngelOne, India's share in the US pharmaceutical market has gone up from six per cent in 2015 to 11% in 2023, making India one of the major suppliers to the US market.
On the other side, experts also expect that the Indian pharma companies may be able to pass over the rise in tariff to the US customers, as the exports is essential to meet a significant portion of the drugs demand in the country.
Pavan Choudary, chairman, Medical Technology Association of India (MTaI), said, "Donald Trump’s announcement today on Truth Social declaring steep tariffs on India from August 1 is troubling and seems economically shortsighted and strategically misguided".
"As a sovereign nation, India makes independent choices in defence and energy based on national interest and long-term strategic priorities. Attempting to punish these decisions through coercive trade measures is not only inappropriate but also counterproductive," he added.
In 1930, the US passed the Smoot-Hawley Tariff Act, slapping steep duties on imports. What followed was catastrophic: US exports fell by 61%, international retaliation ensued, and American farmers and industries suffered immensely. The resulting economic pain deepened the Great Depression and compelled a course reversal through the Reciprocal Trade Agreements Act of 1934 which reduced tariffs and promoted long term trade liberalization, he reminded.
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