Trump tariff on pharma: Trump tariff hunt eyes India’s last stock market refuge but it won’t be an easy kill

The safe haven isn’t so safe anymore. Investors who bought pharma stocks after pharmaceutical companies were exempted from Donald Trump’s tariff tantrums on April 2, are now nursing their wounds. The Nifty Pharma index tumbled 4% on Friday, slamming the brakes on a relief rally that lasted less than 24 hours. Investors who had rushed into stocks like Laurus Labs, Aurobindo Pharma, Lupin, Biocon, Gland Pharma and Cipla watched them fall between 5% and 7% in a single session.

The shock came courtesy of Trump’s chilling declaration: Pharma tariffs are “going to be starting to come in… at a level that you haven’t really seen before.” The announcement, he said, is “under review right now” and will be made “in the near future.”

This threat directly targets a segment that’s long been considered untouchable. After all, India’s pharma exports to the US stood at a robust $12.8 billion in 2024, and big players like Sun Pharma, Dr. Reddy’s, Zydus, Aurobindo, and Gland Pharma have substantial exposure to the American market.

But this won’t be an easy war to wage. Analysts say it’s like trying to cut a lifeline and expecting the patient to survive. Any tariff increase would eventually hit US consumers because there is simply no other country that can manufacture quality drugs at India’s scale and cost.

Indian pharma companies, Nuvama notes, dominate with a 47% share in approved ANDAs and 51% in tentatively approved ones for 2025. They’re not just suppliers; they’re the scaffolding holding up the US generics market.

And it’s not just about numbers. According to Nuvama, “As generics provide > $ 400 billion in annual savings to the US healthcare sector, we think imposing tariffs on generic pharma would be counterproductive.” That’s a $400 billion reason to tread carefully.Also read | No chill, just pills! Pharma stocks slide up to 8% as Trump does yes-no-yes on tariff

Moreover, US capacity to replace Indian suppliers isn’t even close. Local manufacturers can’t fill the void, and even major global players like Teva and Sandoz depend on their Indian manufacturing bases. “Currently local US companies have limited capacity/capability to take away market share from Indian companies,” Nuvama said, warning that doing so could cause “product shortages and supply chain challenges.”

Jefferies points out that contracts with several customers have clauses under which higher input costs can be passed on to customers. “Thus, based on existing contracts, passing on tariff impact is a possibility. Right now, the strategy is to pass on any potential tariff to customers as the generic drug supply chain has limited ability to absorb tariff impact,” it said.

If, in the future, tariffs on US pharma imports are levied, generics could get a lower tariff or exemption, and the financial impact on generics will be lower than innovators as generic drug prices are extremely low and should be able to pass on the prices, the brokerage firm said.

ICICI Securities agrees saying that companies are likely to pass on this charge to consumers and may lead to a significant increase in the overall cost of healthcare in the US.

Besides, some companies may evaluate shifting of certain product manufacturing units to their US-centric plants in case of any mandatory order passed by the government for essential medicines, it said.

That kind of shift might make sense only for select essential medicines, and even then, it’s far from a plug-and-play switch.

So, while pharma might seem like the next big casualty in Trump’s trade war, the sector isn’t standing on the trapdoor just yet. Nuvama wraps it up best—Indian firms offer lower costs, greater USFDA-approved manufacturing capacity, and critical scalability that the US simply can’t do without.

Yes, Trump may have picked up the scalpel—but cutting into this artery could backfire, and badly.

Also read | Sell IT, buy pharma? What Trump tariffs mean for Indian stock market investors