US President Donald Trump has proposed a significant shift in trade policy for generic medicines, outlining steep tariffs aimed at encouraging domestic manufacturing. Under his plan, imported generic drugs will face zero tariffs until August 1, 2028. Subsequently, a 100% tariff will be imposed for one year, rising to 200% from August 1, 2029.
This proposal has put Indian pharmaceutical companies, major global suppliers of affordable generics, under pressure. However, industry analysts and drugmakers do not anticipate a rush to move manufacturing operations to the United States. Instead, Indian firms are expected to adopt a more strategic approach, focusing on portfolio adjustments, export diversification, and selective capacity expansion while awaiting further clarity on the final tariff regime.
Strategic Adaptation for Indian Drugmakers
The two-year zero-tariff window provides a crucial period for Indian pharmaceutical companies to adapt. Namit Joshi, Chairman of Pharmexcil, emphasized this, stating, “The zero-tariff window through 2028 gives the industry a meaningful runway, and we see this as time we can use productively — to keep strengthening our position across multiple markets rather than relying on any single one.” This strategy is already showing results, with exports to Europe increasing by 21% and to Latin America by nearly 24% in April-May FY27 compared to the previous year, now accounting for over 20% and 8% of India's total pharmaceutical exports, respectively.
Companies with existing US manufacturing facilities, diversified export bases, and a larger share of specialty products are likely to be better positioned to absorb potential cost increases. Conversely, firms heavily reliant on low-margin generic medicines with concentrated export markets may face greater challenges.
Challenges of Shifting Production to the US
Shifting large-scale manufacturing to the US presents significant hurdles. Chandrachur Datta, Partner at Vector Consulting Group, noted that current onshore capacities of most large Indian manufacturers are insufficient to absorb the entire production load. He highlighted that replicating the entire supply chain ecosystem — including local sourcing for Active Pharmaceutical Ingredients (APIs), excipients, and packaging materials — is far more complex and costly than simply setting up factories.
Datta anticipates that companies will review their manufacturing footprint and product portfolios, prioritizing higher-value products where profit margins can better absorb potential tariff costs. Some low-margin, high-volume products might gradually be phased out unless lower-cost suppliers emerge. Without reliable and affordable alternatives, a significant portion of the additional tariff costs could eventually be passed on to consumers.
Impact on India-US Trade Negotiations
The tariff announcement also provides a clearer framework for ongoing India-US trade negotiations, where pharmaceuticals remain a key discussion point. Joshi believes this clarity offers an opportunity to build a strong, durable agreement, potentially including specific provisions for generics.
For the immediate future, industry executives indicate that companies will likely expand manufacturing selectively, continue to build exports outside the US, and carefully monitor the evolving tariff framework and the outcomes of bilateral trade talks before committing to any major investment decisions.