US tariff implications on Indian healthcare sector

In this edition, we explore the shifting global trade landscape and the opportunities it unlocks for India's healthcare sector. With growing tariff impositions and evolving bilateral ties, Indian businesses must reassess their global strategies to stay competitive and resilient.

Let’s explore how tariffs will evolve the current trade scenario and what it means for medical devices and pharmaceutical businesses in India.

Tracing the tariff trail

Trade tensions have increased as the US adopts stricter trade policies, focusing on protecting domestic industries and addressing concerns over intellectual property and security. What began with targeted tariffs on China quickly turned into a broader trade war, drawing in countries like the EU and Canada. Tariffs were imposed across key sectors—steel, autos, electronics—followed by waves of retaliation. While there have been some pauses and exemptions, the overall policy remains unpredictable, creating challenges for global supply chains, including those linked to India’s healthcare sector.

Exhibit 1: Key policy statements from US over time

India’s stability amid tariff turbulence

Despite global trade uncertainties, India has remained largely resilient to US-led tariff actions. A narrowing trade deficit, strong domestic consumption, and policy-driven manufacturing growth are strengthening its economic fundamentals. With limited exposure to US tariffs—particularly in non-pharma and non-oil exports—India faces minimal direct impact. In fact, the situation presents an upside: global manufacturers looking to reduce China dependence may increasingly view India as a cost-effective alternative, supported by lower tariffs and local incentives. However, there’s also a risk of excess Chinese goods being redirected into India, potentially hurting local players.

Exhibit 2: India is largely resilient from US-led tariff disruption

India set to gain in key sectors

India is well-positioned to increase its share in the US market as tariffs on competing countries are significantly higher across key sectors like readymade garments, chemicals, and marine products. With Indian exports typically facing a 10% tariff compared to tariffs as high as 145% for Chinese goods, Indian manufacturers have a clear cost advantage. However, medical devices tell a different story—India faces a steep 27% tariff on these products, higher than many competitors, which undermines its competitiveness in this important sector and poses a challenge for exporters seeking growth in the US market. 

Exhibit 3: Implications on major industries 

Medical devices may face competitive challenges

India’s export sectors like engineering goods, gems & jewelry, and readymade garments remain highly competitive in the US market despite tariffs. However, the medical devices sector lags behind, with high US tariffs reducing its competitive attractiveness. This not only limits India’s current market share but also raises the risk of a further decline in US demand for Indian medical device exports compared to other industries that are better positioned to gain from tariff advantages.

Exhibit 4: India’s export attractiveness post US tariffs

Healthcare sector: Navigating US tariff changes

India’s healthcare sector sees both risks and opportunities from US tariff shifts. Manufacturers are exploring new markets in Europe, Southeast Asia, and Africa to reduce US dependence. India’s strong generic drug base supports efforts to negotiate lower medical device tariffs. Pharma focuses on biosimilars, specialty generics, and capturing China’s lost US market share. High FDA costs and 26% tariffs hurt medical device competitiveness, while pharma faces fewer non-tariff barriers. To protect itself, India aims to source raw materials from US trade partners and enforce anti-dumping measures against excess imports.

Exhibit 5: Implications & opportunities for healthcare sector