US President Donald Trump has threatened to impose tariffs of as much as 200% on imported generic medicines, sending Indian pharmaceutical shares lower and placing the industry’s low-cost US export model under its most serious trade threat yet.

Trump said in a Truth Social post that generic drugs imported into the US would remain duty-free for two years from 1 August. The tariff would then rise to 100% from 1 August 2028, and to 200% a year later.

“This is done in order to RESHORE Generic Pharmaceutical Production into America,” Trump wrote, describing the tariffs as a penalty for companies that failed to build plants and equipment in the US during the transition period.

He said existing policies covering patented, branded and innovative medicines would remain unchanged.

US President Donald Trump posts on Truth Social, “Effective August 1st, 2026, all Generic Drugs being brought into the United States will continue to have a TARIFF of ZERO PERCENT for a two year period of time, after which the TARIFF will be raised to 100% for a one year period… pic.twitter.com/KqaKdBAI9j

— Press Trust of India (@PTI_News) July 22, 2026

The announcement gives Indian manufacturers two years to adjust, but leaves crucial details unresolved. Trump did not say whether the tariff would cover active pharmaceutical ingredients, finished formulations or both. Nor did he explain how much manufacturing must take place in the US for a company or product to qualify for an exemption.

The absence of an accompanying executive order, tariff schedule or agency guidance means the announcement remains a policy statement rather than a complete set of enforceable rules.

Pharma shares fall

Indian pharmaceutical stocks fell sharply in early trading on Wednesday, 22 July, as investors assessed the potential effect on companies that derive a substantial share of their revenue from the US.

The Nifty Pharma index fell nearly 2%, with 19 of its 20 constituents trading lower during the morning session. Sun Pharmaceutical Industries, Cipla and Dr. Reddy’s Laboratories were also among the biggest losers on the benchmark Nifty 50.

At about 9.40 am, Cipla was the biggest loser among the major exporters tracked, falling 2.5% to ₹1,396. Lupin also dropped about 2.5% to ₹2,452.

Sun Pharma declined 2% to ₹1,924, while Dr. Reddy’s fell more than 1% to ₹1,185. Zydus Lifesciences, Alkem Laboratories and Torrent Pharmaceuticals dropped by as much as 2%.

The selloff was relatively contained because the tariffs would not take effect for two years. Investors also appear to be allowing for negotiations, exemptions or changes before August 2028.

India’s exposure

The US is the largest export market for India’s pharmaceutical industry. Indian drugmakers exported about $8.7 billion of medicines to the US in the fiscal year ended March 2024, representing about 31% of India’s total pharmaceutical exports, according to the Pharmaceuticals Export Promotion Council of India.

Nearly half of all generic prescriptions filled in the US in 2022 were supplied by Indian manufacturers. Generics produced worldwide saved the US healthcare system an estimated $408 billion that year, according to IQVIA data.

The dependence runs in both directions. More than 90% of prescriptions dispensed in the US are for generic medicines, according to the US Food and Drug Administration.

Trump’s plan therefore threatens not only Indian exporters but also the supply of inexpensive medicines to American pharmacies, hospitals, insurers and patients.

Companies face different levels of risk

The effect will depend on each company’s US revenue exposure, product portfolio and existing manufacturing capacity inside the country.

Dr. Reddy’s is among the most exposed large Indian drugmakers. North America accounted for 47% of its revenue in the fiscal year ended March 2024, according to company disclosures compiled by Reuters.

The corresponding share was 37% for Lupin, 32% for Sun Pharma and 30% for Cipla. The US accounted for 46% of revenue at Zydus Lifesciences and 44% at Biocon, although Biocon’s exposure includes biosimilars, whose treatment under Trump’s generic-drug plan remains unclear.

Lupin’s dependence has since increased. Its US business generated $1.32 billion in the fiscal year ended March 2026 and accounted for 42% of consolidated revenue. The company was the third-largest pharmaceutical supplier in the US by generic prescriptions during the March quarter, according to its annual results.

Aurobindo Pharma has several manufacturing facilities in the US and could be better positioned than companies that rely almost entirely on exports from India. Dr. Reddy’s, Lupin, Cipla and Zydus also have some US manufacturing capacity.

However, existing local plants may not be able to produce every medicine currently supplied from India. Transferring products would require technology transfers, validation, inspections and fresh regulatory approvals for the new manufacturing sites.

Alkem and Torrent have more limited exposure to US generics and rely largely on manufacturing in India. Their direct financial risk may therefore be smaller, although the wider policy could still affect valuations across the sector.

The economics may not work

Moving generic-drug production to the US is substantially more difficult than relocating the manufacturing of patented medicines.

Generic drugs are sold after patent protections expire and often face competition from several manufacturers. Prices can decline rapidly, leaving suppliers with narrow margins and little capacity to absorb additional costs.

US production would involve higher labor, construction and regulatory expenses. Companies may also need to replicate supply chains for chemicals, active ingredients, packaging and testing that have developed across India and other Asian manufacturing centers over several decades.

A tariff of 100% would be almost impossible for a generic manufacturer to absorb on products earning single-digit operating margins. Companies would have to raise prices, move production, negotiate exemptions or stop supplying products that are no longer commercially viable.

A 200% tariff would, in effect, operate less as a conventional import duty than as a prohibition on foreign-made generics unless purchasers were willing to pay substantially higher prices, analysts said.

Analysts see execution risks

Fresh, named sell-side research issued after Trump’s Tuesday announcement was limited in the public domain by Wednesday morning.

Earlier analyst assessments nevertheless illustrate the potential sensitivity. HSBC previously estimated that even a hypothetical 10% tariff could reduce earnings-per-share forecasts for major Indian drugmakers by between 1% and 6.5%, depending on their US exposure and ability to pass on costs.

ICRA said in December that changes to US trade and regulatory policy remained a risk for Indian pharmaceutical companies. It forecast that revenue growth among the companies it tracks would slow to between 6% and 8% in the fiscal year ending March 2027, partly because of weaker growth in the US market.

The rating agency’s assessment preceded Trump’s latest announcement and should not be presented as a direct response to it.

Industry executives have previously argued that pharmaceutical tariffs would ultimately be borne by American buyers. Sun Pharma managing director Dilip Shanghvi said in 2025 that additional tariffs, if imposed, would be passed on to consumers.

That may be possible for differentiated or scarce medicines. It is harder for widely available generics, where wholesalers can switch suppliers and government programs and insurers exert strong pressure on prices.

The tariff policy could also deepen drug shortages in the US.

Manufacturers already withdraw low-volume or low-margin medicines when production costs exceed the prices they can obtain. Tariffs would increase that pressure, particularly for sterile injectables and older hospital medicines that are difficult to manufacture but commercially unattractive.

Companies unable to relocate production may reduce shipments or abandon marginal products, analysts said, adding that US competitors would need time to build capacity, secure regulatory approval and qualify new suppliers.