Healthcare costs in US to shoot up following Trump tariff on Indian goods: Industry experts
President
Donald Trump
on Wednesday announced the imposition of a 25 per cent tariff on all goods coming from India starting August 1, plus an unspecified penalty for buying Russian crude oil and military equipment.
Profits for Indian pharmaceutical firms may decline and research and development may stagnate. However, for the medical devices sector as long as the gap between duty on China and India is over 15- 20 per cent, there are positive prospects for exports to the US, according to experts.
"India isn't just a key supplier of generics to the US. We are a part of the backbone of affordable global healthcare. These duties may interrupt the smooth trade flow, inflate US drug costs, stall treatments, and put even greater pressure on American healthcare budgets," OmniActive Health Technologies Executive Chairman and MD Sanjaya Mariwala said.
On the other hand, he said, "Back home, the profits for Indian pharmaceutical firms may decline, and R&D may stagnate, slowing down innovation and stalling new drug clearances."
AiMeD (Association of Indian Medical Device Industry) Forum Coordinator Rajiv Nath said, "Duties impact for Indian medical devices sector has to be seen from relative competitiveness - as long as duty gap between Chinese versus Indian is over 15- 20 per cent, we have positive prospects to export to USA and even put production lines in USA."
Currently Indonesia and Vietnam have lower duties by 6 per cent. So for products made there they will possibly enjoy a price competitive advantage over India, he added.
Stating that clarity will come after August 12 as then duties on Chinese goods will be clear, Nath said, "They were increased to over 50 per cent but temporarily reduced to 30 per cent.
If post-August duties on Chinese medical devices revert to over 50 per cent and on Indian at 25 per cent, the export prospects versus China are in our favour..."
He further said, "Suffice to say that whatever is the final duty that is finally announced on medical devices, if it's at least 15-20 per cent lower than applicable duty rates by US onto China then there is a strong opportunity for Indian medical devices to increase their exports to US market, if they are able to absorb the excessive high cost of regulatory approval of USFDA for market entry and find that these costs to export are sustainable over the years."
However, he said, the government of India and manufacturers will need to work to improve India's competitiveness "so that we can offset the 6 per cent disadvantage over Indonesian and Vietnam competitors".
Grant Thornton Bharat Partner and Tax Controversy Management Leader Manoj Mishra pointed out that the strong language used by President Trump and ongoing investigations into drug imports mean that the risk is not over yet.
"Indian pharma companies should stay prepared for possible changes, especially if sector-specific duties are introduced later. That said, these tariffs are likely to be in place only for a short period, as both countries are expected to fast-track discussions for a Bilateral Trade Agreement. A balanced and stable trade deal will be key to protecting long-term interests of the sector," he noted.
Similarly, Choice Broking Equity Research Analyst- Pharma Sector, Maitri Sheth said the US remains heavily reliant on India for its pharmaceutical needs, with about 50 per cent of generic drugs sourced from India.
"Given the critical nature of healthcare and already elevated healthcare costs in the US, we view the likelihood of material near-term tariffs on pharma as low," Sheth added.
While the headline risk persists, the structural dependence on Indian pharma and the cost sensitivity of the US healthcare system provide a strong case against aggressive tariff action on the sector, Sheth added.
Medical Technology Association of India (MTaI) Chairman Pavan Choudary said President Trump's is "troubling and seems economically shortsighted and strategically misguided".
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