After imposing a 25 percent tariff on auto imports, Trump will now impose tariffs on the Pharma sector, will the problems of Indian pharmaceutical companies increase?
After imposing a 25 percent tariff on auto imports, Donald Trump is soon going to impose tariffs on the import of pharma products as well. The US President said on Friday that he would soon announce tariffs targeting the pharmaceutical industry. However, he did not reveal its timing and rate. Speaking to the media, Trump also said that he is ready to negotiate deals with countries wishing to avoid US tariffs, but such agreements can only be reached after his administration announces reciprocal tariffs on April 2. Trump said that some countries, including Britain, have contacted the US to discuss potential deals. India’s Commerce Minister Piyush Goyal also recently said that the ongoing talks between India and the US on the proposed trade agreement are progressing ‘well’.
American doctors prescribe 4 out of 10 Indian medicines
After the auto sector, how Trump’s promise to impose tariffs on pharma products will affect Indian pharmaceutical companies is a big question. At present, the US does not impose any duty on Indian medicines. Indian pharmaceutical companies do a large part of the drug supply in the US. In the year 2022, 40 percent of the prescriptions written by doctors in the US, or four out of 10, were supplied by Indian companies. According to industry sources, overall, the US healthcare system saved $219 billion in 2022 from medicines written by Indian companies and a total of $1,300 billion was saved between 2013 and 2022. India’s pharmaceutical industry is currently heavily dependent on the US market and the US accounts for about one-third of its total exports.
Inflation will increase in America
Arvind Sharma, partner at Shardul Amarchand Mangaldas & Co, says that by imposing tariffs, the US may inadvertently increase its domestic healthcare costs. This will put a burden on American consumers and make their access to healthcare scarce. The US has been a net importer of pharmaceutical products to meet its domestic demand. A tariff of 25 per cent or more on pharmaceuticals is quite difficult due to limited supply.
Indian pharmaceutical companies may benefit
According to a report by JP Morgan, if Trump imposes tariffs on pharma products, then Indian companies may benefit from it. The reason for this is the better cost competitiveness of Indian pharmaceutical companies. Due to this, Indian companies can gain more market share in the US market than their global competitors. According to the brokerage firm, even if a 10% tariff is imposed, a large part of it will be transferred to the customers, as regular demand for medicines will remain. According to JP Morgan, Israeli and Swiss companies selling generic medicines in the US work on lower profit margins than Indian companies, so the tariff will have a more serious impact on them.
