The Trump administration has proposed a broad tariff structure that targets copyrighted pharmaceutical products while providing short-term assistance to generic drugmakers.

A 100% tariff on patented pharmaceutical items has been suggested, with implementation timetables of 120 days for large corporations and 180 days for smaller businesses. However, products sourced from the EU, Japan, Korea, Switzerland, and Liechtenstein will incur a 15% charge, while imports from the UK will face an even lower levy.

Companies that enter into Most Favoured Nation (MFN) pricing arrangements with onshoring commitments will be tariff-free until January 20, 2029. Those who exclusively choose onshoring agreements will suffer a 20% tariff at first, which may climb to 100% over the next four years.

Supply chain focus

The policy emphasises the US government’s efforts to improve domestic pharmaceutical manufacture, citing national security reasons.

Officials stated that heavy import dependence, despite strong domestic R&D skills, creates a risk during global supply chain disruptions. Section 232-related measures have already generated around $400 billion in new investment commitments.

The administration has implemented numerous initiatives to stimulate indigenous manufacturing. In May 2025, it signed an executive order to remove regulatory barriers to local production.

Another order was issued in August 2025 to increase supply chain resilience, which included the establishment of API reserves. Section 232 inquiries have also been expanded to include other industries such as PPE, medical devices, and equipment.
Impact on Indian Pharmaceuticals

Patented segment

Sun Pharma remains the only large Indian company with a considerable exposure to branded medications. While the company has not been specifically named, an overhang is likely to persist.

Approximately 20% of its global income originates from branded products. Its main medicine, Illumya, which may be manufactured in the EU, could benefit from lower tariffs. To mitigate risk in the US market, the company may consider MFN agreements or onshoring.

Generics

However, generic medications, biosimilars, and associated substances are now excluded from tariffs, although this will be reviewed after one year.

Certain categories, such as orphan medications, animal health goods, selected specialist medicines, and supplies from trade agreement countries, will remain exempt. The US government also intends to implement tougher monitoring and enforcement tools, such as external audits and the power to impose tariffs retroactively or increase them gradually.

Generic drugmakers will benefit in the short run from the absence of tariffs. However, with a review scheduled in one year, uncertainty persists. India’s cost competitiveness may hinder the viability of large-scale US onshoring in this sector.

India supplies approximately 40-50% of generic pharmaceuticals to the United States. The US accounts for approximately 34-35% of India’s total pharmaceutical exports, which were around $30 billion in FY25.

In FY25, exports to the US were around $10.5 billion, with generics accounting for more than 95%. Shipments to the United States increased by 20.4% throughout the year.

What is Section 232?

Section 232 empowers the US President to restrict imports that pose a threat to national security, including through tariffs or other trade measures, with the ability to change actions over time.

Most Favoured Nation (MFN) pricing guarantees that a buyer will obtain the lowest price offered by a seller to any of its clients. If prices are cut elsewhere, the MFN partner should receive the same advantage.

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