Trump’s 100% Drug Tariff Sends Indian Pharma Stocks Tumbling,
But Digital Trade Talks Offer Hope
While the tariff announcement on patented
drugs sent Indian pharma stocks tumbling, a tentative digital trade deal could show
a path forward
India’s
pharmaceutical sector faces uncertainty following US President Donald Trump’s
announcement of a 100% tariff on imported branded and patented drugs,
which caused Indian pharma stocks to fall sharply. While the tariffs primarily
target branded products, the distinction between generics, branded generics,
and patented drugs leaves some Indian exporters exposed, as the US accounts for
nearly 40% of India’s pharmaceutical exports.
Despite
the market jitters, tentative digital trade negotiations between India and
the US offer cautious optimism. Talks focus on issues such as data
localisation, proprietary technology, and regulatory alignment, potentially
easing market access for US tech companies while opening avenues for broader
trade discussions. Analysts suggest that incremental agreements on pharma and
digital services could lead to a comprehensive trade deal by year-end,
mitigating uncertainty and allowing Indian companies to adapt gradually.
Overall,
the situation underscores both risks and opportunities for India’s
pharma industry amid evolving US trade policies.
A
mood of uncertainty hangs over India’s pharmaceutical sector as US President Donald
Trump’s latest tariff threats have unsettled investors and policymakers alike.
But
behind closed doors, a tentative deal on digital trade and quiet backchannel negotiations
are giving hope to markets and manufacturers in both of the world’s most populous
democracies.
“There
appears to be recognition that the US needs to lower the rhetoric,” said foreign
policy analyst Vivek Mishra, deputy director of the Observer Research Foundation
think tank’s strategic studies programme.
“With
him, you never know because in one instance he may embrace you and on the other
throw you away.”
Trump’s
announcement late last month of a 100 per cent tariff on imported branded and patented
pharmaceuticals rattled Indian markets, triggering a sharp decline in pharmaceutical
stocks.
Though
the lion’s share of Indian exports to the United States are generic medicines rather
than originals, the ambiguity of the move left investors uneasy, unsure whether
generics might soon be targeted as well.
“As
an investor, I would be very cagey about it. It is certainly a pressure point that
he may use against India,” Mishra said, reflecting the anxiety now felt in a sector
that relies on the US for nearly 40 per cent of its outbound shipments.
Until
recently, pharmaceuticals had been shielded from Trump’s decision in August to impose
a sweeping 50 per cent tariff on Indian goods, ostensibly in retaliation for India’s
own barriers to trade and purchases of Russian oil.
Damage limitation
Generic
drugs account for around 90 per cent of US pharmaceutical consumption by volume,
but capture only a 10th of the market’s value, according to UK-based financial forecaster
Capital Economics.
The
targeting of “branded or patented” products, as Trump specified, may not directly
ensnare most Indian exports but the distinction is not always clear, according to
Biswajit Dhar, a professor of economics and planning at New Delhi’s Council for
Social Development.
Many
Indian companies sell “branded generics”, he said, leaving them exposed to regulatory
risk.
The
new layer of tariffs “should not come as a surprise”, influential daily newspaper
the Indian Express said in an editorial on Tuesday.
“Trump
stays determined to bring manufacturing back to the US as well as to bridge the
trade deficit with all countries,” it said, urging Indian policymakers to open up
new markets, reform the country’s bureaucracy to make businesses more efficient
and “conclude a trade deal as quickly as possible to limit the damage”.
Though
Indian Commerce Minister Piyush Goyal’s recent talks in Washington with US Trade
Representative Jamieson Greer failed to achieve a breakthrough on a pact, analysts
point to incremental progress.
The
two sides have reportedly agreed not to require disclosure of proprietary technology,
such as source code, to facilitate digital trade, a long-standing demand of American
telecoms and electronics giants.
“It
is a positive sign that new areas are being discussed,” Mishra said. “India is trying
to identify areas where it can take a hit and offer some concessions to the US.”
The
development could open doors for US tech firms such as Cisco, Ciena and HPE who
have long bristled at India’s data localisation and certification requirements,
viewed in Washington as non-tariff barriers.
The
US is India’s largest trading partner, with bilateral trade on track to reach nearly
US$132 billion this financial year – around 18 per cent of India’s total exports
and 2.2 per cent of its gross domestic product. Pharmaceuticals, mobile phones,
gems, jewellery and garments dominate India’s export basket.
“From
India’s perspective, until recently the view has been that US demands are impossible,”
Mishra said.
For
example, he said the opening up of India’s agriculture sector to US imports was
likely to remain off the table as this was a demand Delhi had long resisted, wary
of a backlash from its millions of smallholder farmers.
Still,
India and the US appear to be inching forward towards an agreement, one cautious
step and concession at a time.
“Pharma
and digital services are two knotty areas to sort out alongside farm imports or
exports. Resolving these issues step by step allows both sides to approach an overall
trade deal with more confidence,” said Uday Chandra, a political scientist at Georgetown
University in Qatar.
“A
trade deal may emerge by the end of the year, reducing anxiety in the market and
enabling everyone to adapt gradually to new economic realities, including higher
US prices. The ultimate losses will be borne by the US consumer, not Indian firms
or consumers. Their interests and those of the US government may need reconciling.”