U.S. Tariffs to Hit Indian Pharma Sector; Auto Industry Faces Minimal Impact
The recent announcement by U.S. President Donald Trump to impose reciprocal tariffs on countries with high import duties on American goods is expected to significantly impact India’s pharmaceutical sector, while the automotive industry is likely to remain relatively unaffected. The move aims to counter trade imbalances, but its implications could vary across different Indian export sectors.
India’s pharmaceutical sector is expected to be the hardest hit as it heavily relies on the U.S. market. Currently, the United States does not impose any import duties on Indian pharmaceutical products, whereas India levies around a 10% duty on American pharmaceutical imports. With the proposed tariffs, the cost of exporting Indian drugs to the U.S. is expected to increase, reducing their competitiveness. The U.S. accounts for a major share of Indian pharmaceutical exports, valued at $8.73 billion in fiscal year 2024. The introduction of tariffs could disrupt this trade flow, impacting revenues for Indian manufacturers and potentially affecting the availability of affordable generic medicines in the U.S.
Industry leaders have voiced concerns about the possible consequences of these tariffs. Cipla CEO Umang Vohra stated that business decisions should not be dictated by tariffs, warning that sudden policy shifts could lead to disruptions in global supply chains. Similarly, Sun Pharma’s Managing Director Dilip Shanghvi cautioned that increased tariffs would ultimately burden consumers rather than justify relocating manufacturing to the U.S. Smaller pharmaceutical firms operating on thin margins may face the most challenges, possibly leading to consolidation within the industry.
In contrast, the Indian automotive sector is expected to face minimal impact from the tariffs. India imposes high import duties on automobiles to protect domestic manufacturers, but the U.S. market is not a significant destination for Indian auto exports. Shashi Mathews, a partner at IndusLaw, noted that the reciprocal tariffs are unlikely to cause major disruptions in India’s auto sector, as its export exposure to the U.S. is limited. While other global automakers such as Ford and General Motors are bracing for losses due to new tariffs, Indian automakers are less reliant on the U.S. and are unlikely to see significant financial repercussions.
The impact of these tariffs underscores broader trade tensions between the U.S. and India. While the pharmaceutical industry could suffer due to increased costs and reduced market access, the automotive sector is better positioned to withstand the changes. Indian stakeholders in the pharmaceutical industry are closely monitoring the situation, hoping for exemptions or alternative strategies to mitigate losses. Meanwhile, automakers remain cautiously optimistic that their sector will remain insulated from major disruptions.
