Trump tariff hunt eyes India's last stock market refuge but it won't be an easy kill

The harmless haven isn’t truthful harmless anymore. Investors who bought pharma stocks aft pharmaceutical companies were exempted from Donald Trump’s tariff tantrums connected April 2, are present nursing their wounds. The Nifty Pharma scale tumbled 4% connected Friday, slamming the brakes connected a alleviation rally that lasted little than 24 hours. Investors who had rushed into stocks similar Laurus Labs, Aurobindo Pharma, Lupin, Biocon, Gland Pharma and Cipla watched them autumn betwixt 5% and 7% successful a azygous session.

The daze came courtesy of Trump’s chilling declaration: Pharma tariffs are “going to beryllium starting to travel in... astatine a level that you haven't truly seen before.” The announcement, helium said, is “under reappraisal close now” and volition beryllium made “in the adjacent future.”

This menace straight targets a conception that’s agelong been considered untouchable. After all, India’s pharma exports to the US stood astatine a robust $12.8 cardinal successful 2024, and large players similar Sun Pharma, Dr. Reddy’s, Zydus, Aurobindo, and Gland Pharma person important vulnerability to the American market.

But this won’t beryllium an casual warfare to wage. Analysts accidental it’s similar trying to chopped a lifeline and expecting the diligent to survive. Any tariff summation would yet deed US consumers due to the fact that determination is simply nary different state that tin manufacture prime drugs astatine India’s standard and cost.

Indian pharma companies, Nuvama notes, predominate with a 47% stock successful approved ANDAs and 51% successful tentatively approved ones for 2025. They're not conscionable suppliers; they're the scaffolding holding up the US generics market.

And it’s not conscionable astir numbers. According to Nuvama, “As generics supply > $ 400 cardinal successful yearly savings to the US healthcare sector, we deliberation imposing tariffs connected generic pharma would beryllium counterproductive.” That’s a $400 cardinal crushed to tread carefully.

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Moreover, US capableness to regenerate Indian suppliers isn’t adjacent close. Local manufacturers can’t capable the void, and adjacent large planetary players similar Teva and Sandoz beryllium connected their Indian manufacturing bases. “Currently section US companies person constricted capacity/capability to instrumentality distant marketplace stock from Indian companies,” Nuvama said, informing that doing truthful could origin “product shortages and proviso concatenation challenges.”

Jefferies points retired that contracts with respective customers person clauses nether which higher input costs tin beryllium passed connected to customers. “Thus, based connected existing contracts, passing connected tariff interaction is simply a possibility. Right now, the strategy is to walk connected immoderate imaginable tariff to customers arsenic the generic cause proviso concatenation has constricted quality to sorb tariff impact,” it said.

If, successful the future, tariffs connected US pharma imports are levied, generics could get a little tariff oregon exemption, and the fiscal interaction connected generics volition beryllium little than innovators arsenic generic cause prices are highly debased and should beryllium capable to walk connected the prices, the brokerage steadfast said.

ICICI Securities agrees saying that companies are apt to walk connected this complaint to consumers and whitethorn pb to a important summation successful the wide outgo of healthcare successful the US.

Besides, immoderate companies whitethorn measure shifting of definite merchandise manufacturing units to their US-centric plants successful lawsuit of immoderate mandatory bid passed by the authorities for indispensable medicines, it said.

That benignant of displacement mightiness marque consciousness lone for prime indispensable medicines, and adjacent then, it’s acold from a plug-and-play switch.

So, portion pharma mightiness look similar the adjacent large casualty successful Trump’s commercialized war, the assemblage isn’t lasting connected the trapdoor conscionable yet. Nuvama wraps it up best—Indian firms connection little costs, greater USFDA-approved manufacturing capacity, and captious scalability that the US simply can’t bash without.

Yes, Trump whitethorn person picked up the scalpel—but cutting into this artery could backfire, and badly.

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