US-India interim trade deal extends tariff shield for Indian pharma, with riders

New Delhi: Pharmaceutical exports from India to the US will continue to be provisionally shielded from Washington’s reciprocal tariffs, which have been lowered from 50% to 18% on broader Indian exports. However, the conclusion of the interim trade deal and a separate national security investigation will determine the final outcome, according to a joint statement issued by both countries early on Saturday.

Under the deal, India will reduce non-tariff barriers to medical device exports from the US, the statement said.

The joint statement outlines a roadmap for reciprocal trade that places a heavy emphasis on securing pharmaceutical supply chains and expanding market access for medical technology.

The agreement, a precursor to the broader US-India bilateral trade agreement (BTA), marks a significant de-escalation in trade tensions.

While the deal spans multiple sectors, its implications for the pharmaceutical and healthcare industries are particularly significant.

The joint statement makes it clear that the provisional exclusion of Indian pharmaceutical exports comprising generic drugs, including antibiotics, vaccines, bulk drugs and intermediates, from reciprocal tariffs is subject to the “successful conclusion of the Interim Agreement.”

The statement also spoke of Indian generic pharmaceuticals and ingredients getting “negotiated outcomes” based on the findings of a U.S. section 232 investigation. That probe is checking whether US’ heavy dependence on foreign medicines and drug ingredients threatens national security and whether it should impose tariffs or restrictions.

This provision in the joint statement suggests that Indian manufacturers may receive specialized status, potentially shielding them from broader national security-related trade restrictions.

Under the newly established framework, the United States will apply a reciprocal tariff rate of 18% on a variety of Indian goods, down from 50%.

This announcement is expected to bolster India’s position as a global pharmaceutical manufacturing hub. By keeping the sector out of barriers, the U.S. aims to ensure a steady supply of essential medications.

Indian drugmakers, who export nearly $10 billion in pharmaceutical products to the US annually, this will have a significant impact on market dynamics.

Furthermore, the statement clarifies the strategic importance of this sector: While India secures wins in drug exports, the United States has successfully negotiated the removal of long-standing hurdles for its medical technology industry. For years, American manufacturers have faced complex regulatory challenges in the Indian market.

In the joint statement, India has formally agreed to: “Address long-standing barriers to the trade in U.S. medical devices.”

“Determine, with a view towards a positive outcome, within six months of entry into force of the Agreement whether U.S.-developed or international standards, including testing requirements, are acceptable for the purposes of U.S. exports entering the Indian market.”

“ Discuss “conformity assessment procedures” for mutually agreed sectors to enhance ease of compliance with technical regulations.

These steps are designed to streamline the entry of cutting-edge U.S. healthcare technology into India’s rapidly growing health sector.

Beyond immediate market access, both nations have committed to “strengthen economic security alignment to enhance supply chain resilience and innovation through complementary actions.” This includes addressing the “non-market policies of third parties,” a move intended to stabilize the global flow of medicines and healthcare components.

The framework also hints at a “$500 billion” purchase plan by India over the next five years, which includes “technology products” that will likely power the next generation of data-driven healthcare and digital health platforms. The two nations intend to “significantly increase trade in technology products… and expand joint technology cooperation.”

The agreement is viewed as a “historic milestone in our countries’ partnership,” demonstrating a “common commitment to reciprocal and balanced trade based on mutual interests and concrete outcomes.” Both nations have pledged to “promptly implement this framework” with a view toward finalizing the full BTA.

Overall, for the healthcare sector, the future of U.S.-India relations will be defined by a trade-off between market access for affordable Indian generic medicines and advanced American medical innovation.

Commerce minister Piyush Goyal said in a social media post on Saturday that tariffs will go down to zero on a wide range of goods, including generic pharmaceuticals, gems and diamonds, and aircraft parts, thereby further enhancing India’s export competitiveness and Make in India.

“India will also get exemptions under section 232 on aircraft parts, tariff rate quota on auto parts and negotiated outcomes on generic pharmaceuticals, leading to tangible export gains in these sectors,” Goyal said.