The US plans to impose a 100% tariff on generic drugs, with India bearing the brunt, but why is the market choosing to "ignore" it?

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Trump announces high tariffs on imported generic drugs, once again pressuring the global pharmaceutical supply chain.

According to CCTV News, on July 21 local time, US President Trump posted on social media that, starting August 1, 2026, all generic drugs imported to the US will continue to enjoy zero tariffs for the next two years. After the two-year period, relevant products will be subject to a 100% tariff for one year; thereafter, the tariff will be further increased to 200%.

Trump stated that the purpose of implementing this policy is to promote the reshoring of generic drug production to the US. Enterprises that fail to establish production factories and related equipment in the US within the stipulated period will face tariff penalties. The current policies for patented drugs, brand-name drugs, and innovative drugs will remain unchanged due to their successful implementation.

Barclays released a research report on July 22, pointing out that since the new tariff sets a two-year transition period, before it officially comes into effect in August 2028, the market is unlikely to reprice related risk in the short term, and investors are more likely to remain on the sidelines.

In emerging Asian markets, India faces the largest risk exposure due to its high proportion of generic drug exports, but the overall impact is still relatively manageable; meanwhile, there remains considerable policy uncertainty regarding whether the new tariffs are consistent with the previously agreed US-India bilateral framework.

Two-Year Buffer Period Weakens Short-Term Market Impact

Barclays believes that the biggest feature of this tariff policy is its slow implementation pace, so its short-term impact on capital markets is expected to be limited. The report notes that there is still a long two-year window before it formally takes effect, and there is still a possibility for further postponement or adjustments to the policy in the future. This judgment is also supported by previous Trump tariff policies on pharmaceuticals.

At the end of September 2025, Trump had announced a 100% tariff on brand-name (patented) drugs and required companies to build factories in the US. The original plan was to take effect in October 2025, but it was later postponed. Ultimately, the policy officially came into force on April 2, 2026, with economies such as the EU, Japan, South Korea, Switzerland, Liechtenstein, and the UK applicable to lower tax rates, while large enterprises and small-to-medium-sized enterprises respectively received 120-day and 180-day transition periods.

Barclays believes that this case shows there is often a long time lag between the announcement and formal implementation of US pharmaceutical tariff policy, so the market may not immediately trade for the long-term risk.

India Faces the Highest Generic Drug Risk

From emerging Asia, Barclays calculates Singapore has the highest exposure in value added (VA) for drug exports to the US, including both direct exports and indirect exports via intermediate products supplied to other economies.

However, Singapore's drug exports to the US mainly consist of brand-name and patented drugs, and these products have already been subject to previous drug tariffs since April this year, so the impact of the newly added generic drug tariffs is relatively limited.

By contrast, the risk for India is more targeted. Although India's economy is mostly driven by domestic demand and is less reliant on external demand, pharmaceuticals are a major component of its exports to the US, and India holds a leading position in the global generic drug market, with generic drugs making up a significantly higher industry share than in Singapore. Therefore, Trump's increased tariffs on generic drugs will have a more direct impact on India's pharmaceutical industry.

However, Barclays also emphasized that from a macroeconomic perspective, the overall scale of India's generic drug exports to the US is not enough to have a significant impact on economic growth, so the overall risk remains manageable.

Risk Warning and DisclaimerThe market carries risks, and investment should be undertaken with caution. This article does not constitute personalized investment advice, nor does it take into account individual users’ specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their particular situation. Investments made based on this article are at their own risk. ```