India Pharma Gains Big: China Lifts Duty While US Imposes 100% Tariffs — What It Means for the Sector

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by

Himanshu
in

In a dramatic shift in global trade policy, China has slashed import duties on Indian pharmaceutical products from 30% to 0% — a move many interpret as a strategic opening at a time when the United States plans to impose a 100% tariff on imported branded/patented drugs effective October 1, 2025.

This twin development presents both opportunity and risk for India’s pharmaceutical industry. What does this mean for exporters, for pharma companies, and for India’s position in the global medicines supply chain? In this deep dive, we unpack the implications, analyze how different players stand to gain or lose, and describe how India can navigate these turbulent waters.

Background: What’s Changing

China’s Move: Zero Duty on Indian Pharma

  • China has eliminated the 30% import duty it had placed on pharmaceutical products coming from India.
  • The duty cut effectively makes Indian drugs cheaper to enter the Chinese market, improving competitiveness.
  • This policy shift comes at a time when China is under pressure to diversify sources and secure supply chains, especially in generics and APIs (active pharmaceutical ingredients).

U.S. Policy: 100% Tariff on Branded/Patented Drugs

  • The U.S. has announced that starting October 1, 2025, there will be a 100% import tariff on branded / patented pharmaceutical products, unless the importing company is building manufacturing facilities on U.S. soil. (i.e. the “under construction / breaking ground” clause)
  • The impact will be mostly on companies exporting high-value branded or patented drugs or those without contractual manufacture in U.S.
  • India’s large generic drug sector may shield many products — but the “branded generics” category is a grey area.

India’s Pharma Sector: Strengths & Exposure

To understand how deeply these changes may affect India, we should examine the structure of India’s pharmaceutical exports.

FactorCurrent Status / Insight
Export mixIndia is a global hub for generic / off-patent medicines. Majority of exports to the U.S. are generics.
Branded / patented exposureA smaller portion; some firms like Sun Pharma have significant patented drug sales in the U.S. market.
Risk areas“Branded generics” — generics sold under a brand name — could be interpreted under the U.S. rule and attract tariffs.
Supply chain / APIsIndia depends on imports for certain APIs (often from China). Stronger access to China’s market could help integration.
Scale & cost competitivenessIndian pharma’s strength is in volume, scale, and lower cost — a key advantage in competitive markets.

Analysts believe many Indian drug makers will be largely shielded from the 100% tariff because their exports are generics/off-patent, which might be exempt. Some firms have minimal patented drug portfolios, reducing their vulnerability.

One report suggests that among Indian firms, Sun Pharma might be the most exposed because a noticeable percentage of its revenue comes from patented products in the U.S. market.

Implications & Opportunities

For Indian Pharma Exporters

  • Access to China: Zero duty gives Indian exporters an incentive to push more into the Chinese market. Price competitiveness will improve.
  • Diversification of markets: With U.S. tariffs looming, firms will want to balance exposure — shifting focus to markets with more favorable terms (China, ASEAN, Africa, Latin America).
  • Product mix review: Companies may prefer to boost their generic portfolio rather than invest further in patented or “branded generics” that might face tariffs.
  • Manufacturing decisions: Some firms may begin or accelerate setting up plants in the U.S. (if feasible) to bypass tariffs.
  • Supply chain integration: With China opening its doors, India could import needed APIs or intermediates more cheaply, improving cost margins.

For China

  • This duty cut helps China secure reliable import sources, reduce supply risk, and perhaps exert trade diplomacy leverage.
  • It may also encourage Indian firms to collaborate, partner, or invest more in China-centric manufacture or R&D.

For U.S. Policy & Trade Relations

  • The 100% tariff threatens to strain relations with major pharma exporting countries.
  • India may respond diplomatically or through trade negotiations, seeking exemptions or carveouts.
  • This could push global pharma to reconfigure supply chains, localize manufacture, or avoid dependency on cross-border trade for critical drugs.

Comparative Snapshot

Here’s a comparative summary of how China’s tariff cut and U.S. tariff hike contrast in their impact on Indian pharma:

Policy ShiftChina: 0% DutyU.S.: 100% Tariff
DirectionBenefit / openingRestriction / barrier
Primary impactEncourages exports to ChinaDisincentive for branded drug exports to U.S.
Affected segmentBroad pharma exports, including genericsBranded / patented / high value segments
Opportunity for IndiaGain market share, cost competitivenessNeed to restructure product mix, explore U.S. manufacturing
Strategic riskOverreliance on China marketLoss of revenue, trade tensions, legal interpretations

Challenges & Risks

While this landscape shift offers opportunities, there are also complications:

  1. Regulatory & Quality Barriers
    China’s import regulations, quality standards, regulatory approvals could still be stringent. A tariff cut is not equal to seamless access.
  2. Tariff Classification & Interpretation
    How the U.S. classifies “branded generics,” or what defines a “patented product,” will matter. Ambiguities could lead to trade disputes or surprises.
  3. Implementation Delays & Compliance
    Even with duty waived, logistics, customs, documentation, inspections and delays can blunt gains.
  4. Concentration Risk
    Too much dependence on China or the U.S. could leave India vulnerable. Diversification of markets remains essential.
  5. Investment Costs
    Setting up manufacturing in the U.S. or scaling new markets will require capital, regulatory approvals, and time.

What Should Indian Pharma Firms Do?

To maximize opportunity and minimize risk, Indian pharmaceutical companies could consider:

  • Strategic Market Shift: Expand footprints in China, Southeast Asia, Africa, Latin America to compensate for potential U.S. constraints.
  • Optimize Portfolio: Focus more on generics / off-patent medicines, reducing exposure to high-risk branded segments.
  • Regulatory Readiness: Align with China’s regulatory frameworks and quality standards ahead of demand.
  • Flexible Manufacturing: Explore options to set up or partner in U.S.-based manufacturing to bypass tariffs.
  • Diplomatic Engagement: Lobby for trade negotiations, seek bilateral agreements or exemptions from U.S. administration.
  • Transparent Disclosure: Be open with investors and public about exposure, vulnerabilities, and plans to adapt.

Outlook & Predictions

  • In the short term, Indian pharmaceuticals will likely see boost in exports to China, especially for lower-cost generics.
  • The U.S. tariff threat may have limited immediate impact for many Indian firms, thanks to their generic orientation.
  • Over the medium term, some restructuring is expected: more partnerships in China, some firms entering U.S. manufacturing.
  • Trade diplomacy will be key — India will push for carveouts, negotiate bilateral trade terms, engage with global pharma bodies.
  • The shifting terrain may accelerate geopolitical realignments in pharmaceutical supply chains, reducing centralized dependency on any one country.

Conclusion

The confluence of China removing its 30% import duty on Indian pharma and the U.S. imposing a 100% tariff on branded drugs creates a stark trade dichotomy: one open door, one closing. For India’s pharmaceutical sector, the moment is loaded with potential — to seize new markets, recalibrate its global strategy, and reshape its export profile.

However, success will depend on execution: regulatory agility, legal clarity, diplomatic leverage, and wise strategic pivots. In global pharma, timing, adaptability, and foresight matter as much as cost competitiveness.

Disclaimer
This article is based on publicly reported policy announcements and trade developments. Interpretations, forecasts, and financial implications are speculative and intended for general informational purposes only. Readers should not treat this as financial, legal, or trade advice and are encouraged to consult experts before making decisions.