Pharma Stocks Gain Despite Trump's 200% Tariff Threat - Here's Why

Pharma stocks traded in the green on July 9, 2025, even as US President Donald Trump threatened to impose up to 200 per cent tariffs on all pharmaceutical imports into the US.

“If they have to bring pharmaceuticals into the country, they are going to be tariffed at a very, very high rate, like 200 per cent. We will give them a certain period of time to get their act together,” he said while speaking to reporters during a Cabinet meeting at the White House. Incidentally, Trump intends to push drugmakers to relocate production to the US.

Despite Trump’s harsh tone, the Nifty Pharma index surged by as much as 0.46 per cent to 22,267.20 during the session. Towards the session’s end, the index pared some gains and closed at 22,208.50, up by 0.19 per cent.

Among the index’s constituents, Mankind Pharma led the pack, closing with 3.73 per cent gains. Following it were Natco Pharma, Laurus Labs, and Biocon, which ended higher by 3.36 per cent, 1.63 per cent, and 1.35 per cent, respectively.

Divi's Laboratories, Abbot India, Ajanta Pharma and Torrent Pharma also gained between 0.5 per cent and 1 per cent.

Capping the gains were Gland Pharma, Dr Reddy's, Glenmark, and Lupin, which lost between 0.5 per cent and 1.15 per cent.

What 200% Tariffs Would Mean For India’s Pharma Sector

As of the financial year 2024, the US currently has a cumulative $115.5 billion trade deficit in pharmaceuticals across the countries, according to data from the US Census Bureau. This means that the US imports more medicines than it exports. The Trump administration intends to fix this imbalance by imposing tariffs.

The US is the world’s largest importer of pharmaceuticals and the second-largest exporter. It imports pharmaceutical products from 98 countries and exports them to 193 countries.

Some of the countries with which the US has the biggest trade deficits in pharmaceuticals include Ireland, Switzerland, Singapore, India, and Germany.

The US’ biggest deficit is with Ireland, amounting to $45.50 billion. Following it, the US had a deficit of $15.70 billion with Switzerland. With India, the US has a deficit of $11.70 billion.

A 200 per cent tariff on pharmaceutical exports could hurt demand for Indian medicines, especially since India plays a major role in providing affordable generic drugs to the US healthcare system.

What's Driving Resilience In Pharma Sector

According to Ajit Mishra, senior vice president, research at Religare Broking, this resilience is largely due to the grace period of 1 to 1.5 years before implementation, allowing companies time to adjust their operations. Moreover, he said, since the tariffs are not immediate, the announcement is viewed more as a future risk than a current disruption.

"The market is also optimistic that ongoing India-US trade negotiations could lead to exemptions or a softer stance, reducing the perceived long-term impact. Furthermore, there is anticipation of strong Q1 FY26 earnings, driven by improving pricing in US generics and new product launches," Mishra said.

Pharma Stocks: Q1 FY26 Expectations

According to an Axis Securities report dated July 9, 2025, pharmaceutical companies under its coverage are expected to report a revenue growth of 9.90 per cent year-on-year (y-o-y) and a 0.80 per cent quarter-on-quarter (q-o-q). 

The earnings before interest, taxes, depreciation, and amortisation (Ebitda) is likely to grow by 11.30 per cent y-o-y and 3.60 per cent q-o-q, while adjusted profit after tax (PAT) is projected to grow by 13.30 per cent y-o-y, though it is expected to decline by 3.50 per cent on q-o-q basis.

The brokerage also anticipates a 30 basis point (bps) improvement in margins on a yearly basis. The brokerage firm attributes this growth mainly to new product launches in the domestic formulations business, lower input costs, and niche product launches in the US market.

Pharma Sector Outlook

In the near term, Mishra said, the pharma sector may experience heightened volatility as uncertainty around US-India trade negotiations and potential tariff developments persists. "Stocks with higher US exposure could see sharper swings, while companies with diversified geographic revenue streams may outperform."

Over the medium term, he said, the threat of tariff remains a key overhang. "If implemented, it could lead to margin pressure, loss of US market share, and force some players to consider relocating manufacturing. The sector’s medium-term outlook will largely depend on the outcome of trade talks— a favourable resolution could remove the overhang, while failure may trigger a sector-wide re-rating," he added.