Recently, the US Commerce Department launched an investigation into the national security implications of pharmaceutical imports, a move that could affect India’s $10 billion annual pharmaceutical exports to the United States. The probe falls under Section 232 of the US Trade Expansion Act, a provision previously used to justify tariffs on imports like steel and aluminium.
This investigation will assess whether the United States’ reliance on foreign pharmaceutical supply chains — particularly active pharmaceutical ingredients (APIs) and finished drugs — poses a national security threat to its domestic healthcare system.
India has steadily grown its footprint in the American pharmaceutical market over the past decade. Between 2015 and 2023, India’s share of US pharmaceutical imports increased from 6% to 11%. This has positioned India among the top five suppliers to the US, along with countries like Ireland, Germany, and Switzerland.
In 2023, the US imported around $170 billion worth of pharmaceutical goods, with India contributing just under $10 billion. India’s exports include a wide range of finished formulations and APIs, which are widely used in the US healthcare system.
Historically, the pharmaceutical sector had been largely exempt from protectionist trade measures, partly due to its humanitarian significance. However, the recent announcement by the US government signals a strategic shift in trade policy, bringing pharmaceuticals under scrutiny similar to semiconductors and critical raw materials.
This policy direction aligns with earlier criticisms by President Donald Trump, who expressed concerns about America’s dependence on offshore pharmaceutical manufacturing. The April 14 notification in the Federal Register indicated the government’s intent to examine imports of medicines, APIs, and derivative products more closely.
The degree of impact from this investigation could differ across Indian pharmaceutical firms depending on their exposure to the US market. According to reports:
If the investigation results in new trade barriers or tariffs, these companies may face challenges related to cost structures, regulatory compliance, or potential shifts in supply chains.
Generic drugs form the backbone of India’s pharmaceutical exports to the US, providing affordable healthcare solutions. The US healthcare system benefits significantly from these imports, with generic drugs contributing an estimated $400 billion in annual savings.
While China exported only about $2 billion worth of pharmaceuticals to the US in 2023, its role in API manufacturing is noteworthy. Any regulatory or tariff-related disruptions could lead to global shifts in supply chains, potentially increasing production costs or causing supply bottlenecks.
As geopolitical and trade dynamics evolve, the outcome of this Section 232 investigation will be closely watched by stakeholders across both countries. The probe highlights how strategic sectors like pharmaceuticals, once viewed solely through the lens of public health, are now increasingly becoming part of broader national security and economic narratives.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Apr 16, 2025, 3:48 PM IST
Team Angel One
We're Live on WhatsApp! Join our channel for market insights & updates
Get the link to download the App
