Enhanced tariffs levied on pharmaceutical imports will severely impact Indian pharmaceutical companies as it would lead to higher production costs, making shipments less competitive against products from other countries.
According to experts, the automobile sector, however, is likely to face minimal impact as the US is a small export market.
US President Donald Trump recently said that reciprocal tariffs on countries that impose high tariffs on US products will come into effect on April 2. He had termed India as a high tariff-imposing nation.
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Effect on pharma sector
India currently levies about 10% import duty on American drugs while no charges are levied on Indian drugs being imported by the US.
Notably, four of ten medical prescriptions in the US in 2022 were supplied by Indian companies. Additionally, Indian firms are also heavily reliant on US importing medicines, with the country accounting for roughly a third of the Indian pharmaceutical industry’s total exports.
Shardul Amarchand Mangaldas & Co Partner Arvind Sharma told PTI that as of recent history, the US has been a net importer of pharmaceutical products to meet its domestic demand.
“In the event the US decides to impose substantial tariffs on pharmaceutical imports from India, the impact could send noticeable ripples through the Indian pharma sector and simultaneously disrupt its domestic consumption,” he noted.
As per industry sources, overall, medicines from Indian companies provided $219 billion in savings to the US healthcare system in 2022 and a total of $1.3 trillion between 2013 and 2022.
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Generics from Indian companies are expected to generate an additional $1.3 trillion in savings over the next five years.
“A sudden tariff increase could significantly raise the cost of medicines manufactured in and exported from India to the US, making them less competitive against products from other countries,” he added.
By imposing tariffs, the US might inadvertently increase its domestic healthcare costs, burdening consumers and, in turn, making healthcare access scarcer, Sharma stated.
Additionally, in the situation where substantial tariffs are imposed by the US on Indian pharmaceutical products, then that might encourage Indian pharma companies to diversify their export markets, possibly shifting focus to Europe, Latin America or Africa, he said.
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Effect on auto sector
According to Shashi Mathews, Partner, IndusLaw, the recent announcements and pushback by the Trump Administration on India’s tariff, especially in the auto sector, will have a very minimal impact.
“Reason being that while entry into India may be well protected and thus, heavily taxed, a reciprocal tariff for importing into the US, which is a smaller export market for the Indian automotive sector will not affect us much,” he added.
There can be some impact, especially for the automotive components market, he said.
Mathews noted that despite the push for reducing tariffs to zero, it is highly unlikely that the Indian government will reduce tariffs to that level in the near future.
“We have shown our inclination to lower the tariffs by reducing duties on high-end motorcycles, but bringing it to zero will not bode well for the domestic industry as well, and therefore, is unlikely to happen,” he said.
