India-U.S. Trade Surplus Under Fire: Pharma Sector in the Crosshairs
The United States is one of India’s largest trading partners, with bilateral trade reaching USD 124 billion in calendar year 2024 (CY24). India exported USD 81 billion worth of goods to the U.S., while imports stood at USD 44 billion, resulting in a trade surplus of USD 37 billion in India’s favor. This surplus is largely driven by strong exports in pharmaceuticals, electronics, and textiles.
India’s top exports to the U.S. include:
- Electronics (15.6% of total exports to the U.S.)
- Gems & Jewelry (11.5%)
- Pharmaceutical products (11%)
- Machinery for nuclear reactors (8.1%)
- Refined petroleum products (5.5%)
On February 13, 2025, the Trump administration introduced the Reciprocal Tariff Plan—a policy designed to align U.S. tariffs and trade barriers with those of countries where the U.S. runs a trade deficit. A reciprocal tariff refers to a trade policy where tariffs are imposed on imports from a country in proportion to the tariffs or barriers that country imposes on U.S. exports.
Following this, on April 3, President Trump unveiled a comprehensive tariff package to address trade imbalances and protect U.S. industries. Effective April 5, a blanket 10% tariff was applied to all imports, with higher duties for countries running large trade surpluses with the U.S. India, as one such country, now faces a 26% tariff on its exports to the U.S. However, pharmaceuticals and semiconductors were initially exempted from this action.
That exemption may be short-lived.
On April 8, President Trump announced that the U.S. would soon introduce a “major” tariff on pharmaceutical imports, aiming to pressure global drugmakers to shift production back to the U.S. He emphasized America’s leverage as a large consumer market:
“Once we do that, they’re going to come rushing back… because we’re the big market.”
This shift has major implications for Indian pharmaceutical companies, which are critical to the U.S. healthcare ecosystem. According to news reports, in 2022, Indian firms supplied four out of every ten prescriptions filled in the U.S., highlighting their central role in keeping medicines affordable and accessible.
According to a Motilal Oswal report, two key factors determine sectoral vulnerability under the U.S. reciprocal tariff policy:
- Tariff differential between India and the U.S.
- Export value of that sector
By this framework, India’s pharmaceutical sector—with a lower tariff differential (<10%) but high export value (~USD 8.9 billion)—is among the most vulnerable, and now more likely to be impacted under the evolving U.S. trade policy.
Conclusion
The recent actions by the U.S. mark a significant shift in trade policy and pose a serious challenge to India’s key export sectors. While the initial exemptions for pharma and semiconductors offered temporary relief, the proposed “major” tariff on pharmaceutical imports suggests that even high-value, low-tariff sectors are not immune.
India’s trade surplus and high exposure in specific categories like pharmaceuticals, electronics, and textiles make these sectors especially vulnerable to U.S. protectionist measures. As the situation evolves, policymakers and exporters must brace for a potential realignment in global trade dynamics, with India’s pharma sector likely to face the brunt of the next wave of tariff actions.
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