President Donald Trump’s executive order from April 2025 implements a comprehensive array of measures designed to tackle the ongoing trade deficits faced by the United States. The order encompasses various advanced industrial sectors, but its specific focus on pharmaceuticals is particularly noteworthy. The order highlights the careful consideration required to enhance domestic manufacturing while maintaining consistent access to essential healthcare products. 

The executive order addresses the significant reduction in U.S. manufacturing capacity across multiple sectors, including automobiles, shipbuilding, technology products, and particularly, pharmaceuticals. The order highlights concerns regarding national and economic security, stating that “Over time, the persistent decline in U.S. manufacturing output has reduced U.S. manufacturing capacity.” The necessity of sustaining strong and resilient domestic manufacturing capabilities is especially pressing in specific advanced industrial sectors such as automobiles, shipbuilding, pharmaceuticals, technology products, machine tools, and basic and fabricated metals. This is due to the risk that if competitors secure a significant share of the global market in these areas, U.S. production may face long-term vulnerabilities. Scaling manufacturing capacity in the defence industrial sector is essential for producing the necessary defence materials and equipment to safeguard American interests both domestically and internationally. This observation establishes a foundation for the wider trade measures, indicating that if left unaddressed, a decline in domestic capacity may significantly impact U.S. sovereignty and economic resilience. 

The pharmaceuticals sector is identified as crucial, encountering a twofold challenge: there is an urgent requirement to enhance domestic production, while the existing global supply chain conditions demand ongoing dependence on foreign imports. The strategic decision to exempt pharmaceuticals from the newly imposed 10% ad valorem duty illustrates the government's careful consideration in addressing immediate healthcare needs while also weighing the implications for long-term industrial competitiveness. 

Section 3(b)(iv) of the order specifies that pharmaceuticals, among various other essential products, are not subject to additional tariffs. The order specifies that these products “are exempt from the 10% additional ad valorem duty imposed on all imports beginning April 5, 2025, as well as the country-specific duties detailed in Annex I, which will take effect on April 9, 2025.” The exemption plays a vital role in ensuring that there is no immediate disruption to the supply chains responsible for delivering essential medicines to American consumers. Maintaining a consistent supply of pharmaceutical imports has become a critical national concern during global health crises like the COVID-19 pandemic, when Americans faced challenges in obtaining essential products. However, this exemption highlights a policy tension: while the administration aims to decrease foreign dependency in strategic sectors, it acknowledges that implementing tariffs on pharmaceuticals could unintentionally threaten public health. 

The effects of this U.S. trade policy reach well beyond the borders of the United States. In India, the pharmaceutical sector, a significant provider of generic drugs to the U.S., has undergone a challenging phase during the first quarter of 2025. The NIFTY Pharma Index, indicative of the performance of Indian pharmaceutical stocks, experienced a notable decline from January to February 2025. Beginning at 23,569.95 on January 3, the index fell to a low of 19,755.8 on February 28, reflecting a 16.2% decrease during a period of increased market volatility. Experts link this significant decline to worldwide economic challenges and expectations regarding changes in U.S. policy. 

In early March, the market experienced a notable recovery, with the index rising from 19,764.25 on March 3 to reach a high of 21,880.8 by March 21. The recovery was supported by an increase in trading volume and a resurgence of investor optimism. The decline observed in late March was swiftly eclipsed by the favourable sentiment generated by the executive order issued on April 1, 2025, which provided exemptions for pharmaceuticals from further tariffs. The recent policy nuance has garnered a positive response in India, as prominent pharmaceutical companies including Gland Pharma Ltd., Aurobindo Pharma Ltd., Dr Reddy’s Laboratories Ltd and Sun Pharma Ltd have experienced notable increases in their stock prices. 

On April 3, shares of various companies experienced a notable increase, with Gland Pharma reporting gains reaching up to 15%. The market response indicates the sector's responsiveness to U.S. trade policies. According to an industry insider, the decision highlights the importance of affordable, life-saving generic medications in relation to public health, economic stability, and national security. Broking analysts share a similar viewpoint; Citi stated, “This aligns with our position where we have consistently assigned a low probability of tariffs on Indian pharma,” whereas CLSA cautioned that while the exemption may be temporary, the rebound effect could be substantial for U.S.-focused Indian pharma stocks. 

The U.S. policy reveals a contradiction: it emphasises the necessity of enhancing domestic production in sectors considered crucial for national security while simultaneously highlighting the importance of protecting supply chains that support public health. The selective tariff exemption for pharmaceuticals highlights this duality. The administration has decided to forgo additional tariffs on pharmaceutical imports, a move intended to address immediate supply chain risks and establish a foundation for future measures that may strengthen domestic capacity. Without immediate incentives to enhance local production, the U.S. faces the possibility of continuing its dependence on foreign suppliers—a situation that could ultimately jeopardise long-term strategic interests. 

Indian healthcare leaders, including Mr. Pavan Choudary, Chairman of the Medical Technology Association of India, contend that the U.S. administration’s decision to impose reciprocal tariffs is a short-sighted move driven more by trade imbalances than by genuine policy insight. Industry experts argue that protectionist measures typically have adverse side effects, ultimately burdening consumers and patients in both countries by inflating costs and disrupting supply chains.

Indian healthcare manufacturers are particularly concerned about the classification of medical devices. In India, many medical devices are categorized as drugs, a nuance that complicates tariff exemptions. While U.S. policy has spared pharmaceuticals from these tariffs, the lack of a similar exemption for medtech exports is seen as a missed opportunity. This regulatory misalignment could lead to higher costs and reduced efficiency, thereby compromising the quality and affordability of healthcare delivery.

Historical data and industry research suggest that protectionist tariffs rarely foster long-term economic growth. Instead, they tend to create inefficiencies in global supply chains. In the context of healthcare, these disruptions could result in delays in accessing critical medical equipment and medicines, affecting patient outcomes on both sides of the Atlantic.

Despite the challenges posed by U.S. tariffs on medical devices, Indian healthcare industry stakeholders see strategic openings in the broader trade landscape. With the U.S. imposing higher tariffs on goods from other South Asian countries and China, there is a growing consensus that India can capitalize on its manufacturing strengths. By enhancing global quality standards and reinforcing its reputation as a reliable trade partner, India can expand its presence in several sectors beyond healthcare, such as textiles, footwear, and iron and steel.

The industry emphasizes that economies benefit most when they concentrate on their inherent strengths. For India, this means further investing in innovation, quality control, and efficient manufacturing processes. This strategy not only bolsters the healthcare sector but also reinforces India’s overall position in the global marketplace.

Industry leaders are urging both the Indian and U.S. governments to engage in more meaningful dialogue to resolve these trade issues. Rather than resorting to retaliatory tariffs, a cooperative approach could help mitigate disruptions, lower costs, and sustain the bilateral trade relationship. Such discussions would allow for adjustments in classification and tariff policies that better reflect the complexities of modern global supply chains.

Ultimately, the Indian healthcare industry’s assessment aligns with Mr. Choudary’s view that tariffs must be part of a broader, balanced strategy. Policymakers are encouraged to consider not just the immediate trade imbalances but also the long-term impacts on innovation, cost-effectiveness, and patient care.

The consensus among Indian healthcare stakeholders is clear: while U.S. reciprocal tariffs aim to protect domestic industries, they risk undermining the very foundations of free and fair global trade. With the exemption of pharmaceuticals providing some relief, the classification of medical devices remains a critical point of contention. The industry remains hopeful that continued bilateral dialogue and strategic policy reforms will foster an environment where both nations can benefit from efficient, cost-effective, and high-quality healthcare solutions.

The recent executive order demonstrates a practical and somewhat uncertain stance on trade policy. The intention to address trade deficits and boost domestic manufacturing is evident; however, the specific exemption for pharmaceuticals suggests a continuing challenge in balancing national security issues with the complexities of global supply chains. Investors and policymakers are expected to monitor the effectiveness of this strategy in balancing economic resilience with immediate public health requirements.