Trump's war on Indian drugs risks a global supply shock

India Today

4 days ago

India, a top-five supplier of medicines to the US, is now in the crosshairs of Donald Trump's latest trade offensive. In a move that could ripple through hospitals and households across America, the US president is planning tariffs as high as 250 per cent on imported drugs. In this sector, India plays a crucial role.The US president has already proposed 200 per cent tariffs on pharmaceutical imports and reportedly conveyed this to Ireland's prime minister. Ireland is the largest exporter of drugs to America. India's USD 12.5 billion shipments of low-cost generics make it a critical link in the US healthcare chain — and a vulnerable one.advertisement
Why it matters: The US relies on India for affordable generics. Steep tariffs could spike drug prices, strain supply chains, and hit both Indian exporters and American patients. Markets are already flashing concern.In numbers:$12 billion: Value of Indian drug exports to the US in 2024$10.5 billion: US trade deficit in pharma as of May 202525–250%: Range of proposed tariffs on Indian medicines+9 percentage points: Rise in average US pharma tariffs if 25% levy holds$50 billion: Total size of India's pharma market$26.5 billion: Value of India's total drug exports5th: India's ranks among US pharma suppliers after Ireland, Germany, Italy, and the NetherlandsIn-depth: India is a pharmaceutical powerhouse. It manufactures one in every five generic drugs used in the US, earning its nickname, 'pharmacy of the world'. These low-cost treatments keep healthcare affordable for millions of Americans.But Trump's new tariffs risk unravelling that system. Industry experts say even a 25 per cent tariff could lift average pharma duties by nine points, a shock for hospitals, insurers, and patients. The threat of further hikes has already rattled markets.Since April, the S&P 1500 Pharma Index has fallen more than India's Nifty Pharma. Investors expect pain, not protection, for US firms.And while the goal is to shift manufacturing home, pharma executives say the tariffs will only raise costs and delay investments. Many drug ingredients still come from abroad. The result could be supply gaps, higher prices, and worse care.Big picture: When Trump took office, the average US tariff rate was just 2.5 per cent. It has since surged to between 17 and 19 per cent, depending on the estimate. The Atlantic Council warns it could reach 20 per cent, the highest in a century, as another round of duties kicks in on Thursday.Right before Thursday midnight, Trump claimed that billions of dollars would start pouring into the US thanks to the tariffs targeting nearly 70 US trade partners with duties from 10 to 41 per cent. Trump launched a tariff campaign in April, accusing other countries of unfair trade.advertisementTrump imposed a 25 per cent tariff on Indian imports, adding to the 25 per cent levy announced last week. This higher duty takes effect in 21 days, as stated in the order, leaving room for negotiations. However, pharmaceutical products are on the exemption list at the moment.Tariffs used to protect factory jobs. Today, they're tools of foreign policy. Trump's evolving doctrine is part punishment, part politics — and the drug industry could be the latest casualty.What they said: 'In one year, one and a half years maximum, it's going to go to 150 per cent, and then it's going to go to 250 per cent because we want pharmaceuticals made in our country,' Donald Trump told CNBC in an interview.- EndsTune InMust Watch