Pharma Stocks Down 10% as Trump Warns of Possible Tariffs on the Sector

Shares of Indian pharma companies including Aurobindo Pharma, IPCA Laboratories Lupin tumbled by about 10% on April 4 after US President Donald Trump hinted about the upcoming tariffs on the sector.

“Pharma tariffs are going to come in at levels you haven't really seen before. We are looking at pharmaceuticals as a separate category. We will be announcing that sometime in the near future, and not too distant future. It's under review right now,” Trump said, while speaking to reporters on Air Force One.

Following these developments, pharma stocks withered up all the gains made on April 3.

Indian pharma companies rallied on April 3 on reports of Trump’s exemption on the sector. However, it was clear that this was only a temporary exemption.

Previously, there were indications that sector-specific tariffs would not be part of the April 2 event in the Rose Garden. The Trump-led administration is set to evaluate pharma and semiconductors under Section 232 of the Trade Expansion Act of 1962, which gives powers to the US government to place restrictions on imported goods that are potent of threatening national security.

As per Citi, pharmaceutical companies will aim to pass on the tariff hikes to payors. If costs are not passed on to the end patients, the entire supply chain will have to somehow absorb the increase.

Jefferies stated that removing import duty on pharma imports from the US is doable. India imports about $800 million worth of pharmaceutical products from the US, while exports to the country are equal to $8.7 billion.