Trump's announcement of a "major tariff" quickly causes a strong sell-off in Nifty Pharma, while Lupin and Gland Pharma fall 5%.

According to CLSA, given their large market share, Indian pharmaceutical companies are likely to pass on the costs even if tariffs are applied.

Pharmaceutical stocks suffered in trading on April 9 after U.S. President Donald Trump reaffirmed his plans to put high tariffs on pharmaceutical imports in an effort to reshore drug manufacturing to the U.S. The Nifty Pharma index has plummeted 14% in the last six months.

“We’re going to be doing something very big on drug imports — a major tariff is coming,” Trump told the audience. “We want these companies to make their products here, in America, not in China or elsewhere.”

Speaking at an event hosted by the National Republican Congressional Committee, Trump said the move is intended to reduce American dependence on foreign drug supplies and revitalise domestic pharmaceutical production. However, Trump did not provide specific details on the scale or timeline of the proposed tariffs.

This is anticipated to considerably hurt domestic pharma players, that depend on exports of generic medication formulations to the U.S. for a large amount of their sales.

The Nifty Pharma index has dropped by over five percent since President Trump declared that pharmaceutical imports would also be subject to tariffs. Due to investors reducing their exposure to pharmaceutical-related stocks, the index has dropped by almost 14% during the last six months.

All components were down as the Nifty Pharma index fell 2% to 19,964.10 at 9.20 am. With declines of up to 5%, Lupin, Gland Pharma, and Zydus Lifesciences were the index's biggest losers.

International stockbroker CLSA, however, reassured investors that there is little chance of significant tariffs on pharmaceutical imports. Because Indian generics significantly reduce costs for the U.S. healthcare system, CLSA thinks the risk is lower than what the markets are now pricing in. The U.S. healthcare system received 46% of its generic savings from Indian businesses.

Furthermore, given their large market position, the Hong Kong-based brokerage thinks that Indian pharmaceutical companies will probably pass on the costs even if tariffs are applied.

However, generic products can only command very low margins, so if these Indian pharmaceutical companies are unable to raise their prices, they may stop manufacturing, which could lead to drug shortages in the United States. According to CLSA, India currently imposes a 5–10 percent customs duty on pharmaceutical imports from the United States, which could pave the way for reciprocal tariffs of up to 10 percent on Indian pharma exports to the United States.

But, given that India collects less than $50 million in customs duty from U.S. pharma imports, the government is likely to consider removing this duty altogether. If that happens, the U.S. may reciprocate by holding off on any reciprocal tariffs, which could ease concerns for Indian pharma exporters.