India and the US are on the verge of a trade agreement that will transform commerce between the two largest democracies in the world. The next few weeks of June and July 2025 will be pivotal for their trade relationship as negotiations enter advanced stages.
The goal is to take annual bilateral trade between the two nations to $500 billion by 2030 from the current $190 billion. Both sides are aiming to sign an interim agreement by early July, before US President Donald Trump resumes sweeping global reciprocal tariffs following a 90-day pause. The trade deal between India and the US is not just about tariffs, but as much about geopolitics and maintaining strategic diplomatic ties amid global uncertainty influenced by the Trump administration’s radical policies. If successful, India will become the first country to sign a bilateral trade agreement (BTA) of such with the US during President Trump’s second term in the White House.
The pharmaceutical sector is at the cornerstone of the BTA. The US is India’s largest trading partner and the largest export market for Indian-manufactured pharmaceuticals, accounting for 31.35% of India’s total pharmaceutical exports. Generic drug products account for the majority of this percentage, such that almost half (47%) of all generics used in the US are imported from India. India imposes a 10% tariff on US pharma imports, while the US does not currently charge any reciprocal duties.
The US initially exempted pharmaceuticals from a broader tariff on most imports, providing a temporary reprieve for companies in India. This may change amid President Trump’s push to encapsulate pharmaceuticals under its reciprocal tariff policy, for which a 26% levy was announced by the US for Indian imports. The threat of sector-specific duties has weighed heavily on the global pharmaceutical industry, but specifically for India and its generic drug sector. GlobalData has been closely monitoring and analysing the Trump administration’s new trade policies, with a specific focus on the impact of future potential pharmaceutical tariffs.
As part of the BTA negotiations and in light of the tariff threat, India’s pharmaceutical industry has proposed several bold measures to overcome these barriers. Some of these include:
• Tariff exemptions for pharmaceuticals
• Greater access to technology transfer for research and development
• Intellectual property legislation reforms for innovative originator medicines
• Relaxed export restrictions
• Targeted incentives to promote US manufacturing
• Low-cost generic drug supply
Several reports indicate that India has made substantial tariff offers and market access concessions to avoid punitive US tariffs. More specifically, the Indian Pharmaceutical Alliance, an organisation representing the country’s largest pharmaceutical companies, has urged the government to reduce import tariffs from the current 10% to zero for pharmaceutical imports from the US. The question now is whether India can secure similar terms for its pharmaceutical industry in return, given the close ties between Prime Minister Narendra Modi and President Trump and the critical nature of India’s generic drug exports to the US healthcare system. However, there is a consensus that the US may not offer full parity in terms of export control easing, but instead that specific drug categories could possibly be exempted.
America’s concern over India’s intellectual property rights (IPR) has prompted the Indian government to consider reforms of its IP and patent laws. India has proposed strengthening its IPR and its Patents Act to end “evergreening” by US pharmaceutical companies. India has long resisted foreign pressure to revise its patent laws, despite being part of the Trade-Related Aspects of Intellectual Property Rights agreement. On the more negative side for pharma, India is suggesting reducing the patent exclusivity period for innovative drugs from the current 20-year term to expedite the availability of generics in the country. Since India is already a late-launch market for innovative therapies, the reduction of patent exclusivity periods will further delay their entry and market access.
Amid President Donald Trump’s stated desire to sharply reduce drug prices on the US market, India has also proposed to supply generic medicines at between 20% and 25% of the current reference branded prices, for three years after originator patent expiry. Following the three years, India will introduce an additional 10% to 15% cost reduction for these products over seven years. Generic products already enter the market at a lower price than the originator, so India is effectively offering a financial incentive that the US could accept, given its reliance on Indian-manufactured generics. It comes amid efforts by Trump to control drug prices through an Executive Order that aims to reduce prescription drug prices by up to 80% under the Most Favored Nation rule, which is essentially international reference pricing (IRP).
Aside from tariff exemptions, India is also seeking greater access to critical advanced technologies on par with other countries such as Australia, the UK and Japan, to boost its technological infrastructure and innovation in pharma. The US has already made such concessions for certain allies as part of strategic agreements like the AUKUS (Australia/UK/US) partnership. However, concerns over IPR in India mean that the US would be reluctant towards this provision, instead offering alternative exemptions such as technology transfers for trusted partner programmes or project-specific licences for select Indian companies. One example is the recent launch of the India-US TRUST (Transforming the Relationship Utilizing Strategic Technology) initiative, a BTA that aims to catalyse government-to-government, academia and private sector collaboration in key sectors such as biotechnology.
Technology transfer for manufacturing purposes in India will be difficult if Trump imposes import duties on pharmaceuticals. As such, the Indian delegation has proposed increasing US manufacturing by Indian pharma companies of active pharmaceutical ingredients (APIs) and the final stages of drug processing. More specifically, India is seeking targeted incentives for its pharma firms willing to establish API and formulation facilities in the US. The Trump administration’s push for domestic pharmaceutical production has already resulted in a surge of investments from global pharma companies, as well as India-based companies aiming to enhance their US manufacturing and research and development capabilities. Since India is one of the top generic manufacturers globally and exporters to the US, this proposal is likely to be considered.
“Navigating tariffs and diplomacy: the future of India-US pharmaceutical trade” was originally created and published by Pharmaceutical Technology, a GlobalData owned brand.
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