India-US trade deal: Tariff shield for pharma, electronics

NEW DELHI: Amid concerns over an adverse impact over exports after Donald Trump announced a 25% tariff and an unspecified penalty on Indian exports, there are at least a few sectors - pharma and electronics - that can hope to breathe easy, at least for the time being.

Pharmaceuticals had been exempted from higher duties when reciprocal tariffs were announced in early April and the dispensation continues for the moment, government officials said. Similarly, in case of electronics goods there is an exemption up to Aug 14. Pharma and electronics goods together account for over $20 billion of exports to the US. Besides, the US drug sellers are seen to have a lot of leeway in reducing prices, given the high margins enjoyed by them.

In the case of pharma, domestic players believe that Indian exports will retain their edge, given the low cost manufacturing done in the country as well as the large share of the American market.

"Indian pharma exports will not face a significant impact given the cost advantage. India has a 40% share of the US pharma market and it is tough to find good quality and low-cost substitutes," said Dinesh Dua, former chairman, Pharmexcil, adding that setting up a unit in the US takes time and a steep import duty will not go down well with American buyers.

As the dust settled, other industry players too suggested that the impact can be blunted. "The tariff of 25% is higher than what we expected but we should not be overly worried as long as Vietnam and Bangladesh tariffs are not revised downward from the current levels. Apparel exports are expected to slow down till the announcement of an interim bilateral trade agreement (BTA), hopefully to conclude in Oct-Dec 2025," said AEPC chairman Sudhir Sekhri.

His counterpart at Council for Leather Exports, Rajendra Kumar Jalan also said a trade deal will benefit domestic players. "There will be a big setback in the short term as 22% of our exports are to the US. We have already lowered our margin by 3-5% and no market can absorb another 15% additional duties and exporters are in no position to offer fresh discounts," he said.

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