Trump announces new generic drugs tariff plan: No tariffs for 2 years, then 100%, and then 200%

Giving generic drugmakers a two-year reprieve and setting the path for steep duties thereafter, US President Donald Trump on Tuesday announced a phased tariff plan for imported generic medicine.

Trump's new plan offers manufacturers a two-year window before imposing sharply higher import duties as part of a broader push to relocate pharmaceutical production to the US.

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Under the plan, generic medicines entering the US will continue to attract zero tariffs for two years from August 1. Thereafter, imports will face a 100% tariff for one year, followed by a 200% levy.

The move is aimed at encouraging drugmakers to establish manufacturing facilities within the US rather than relying on overseas production.

The latest announcement provides temporary relief to Indian pharmaceutical companies, which derive a significant share of their revenues from the US generic drug market.

For Indian exporters, the two-year tariff-free period offers additional time to reassess supply chains and investment plans. While the immediate impact on exports is likely to be limited, the proposed escalation to 100% and eventually 200% tariffs could significantly alter the economics of supplying generic medicines to the US if manufacturers do not establish a stronger local production footprint.

It may be noted that India is among the largest suppliers of affordable generic medicines to the US, with companies such as Sun Pharma, Dr Reddy's Laboratories, Cipla, Lupin, Aurobindo Pharma and Zydus Lifesciences having an extensive presence in the country.

The longer-term tariff roadmap is expected to keep Indian companies on alert as they evaluate manufacturing and investment strategies.

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Trump indicated that the phased tariff structure is designed to incentivise companies to build manufacturing plants and related infrastructure in the US within the transition period. Companies that fail to localise production would eventually face punitive import duties, reinforcing the administration's broader "America First" manufacturing agenda.

The announcement comes as the Trump administration continues efforts to reshape the pharmaceutical supply chain and reduce dependence on overseas manufacturing.

It also complements the administration's most-favoured-nation drug pricing policy, which seeks to align US medicine prices more closely with those prevailing in other developed economies. The policy on patented and innovative medicines, however, remains unchanged.

According to the US Food and Drug Administration, generic medicines account for more than 90% of prescriptions dispensed in the country, making them central to the US healthcare system and a key export opportunity for Indian drugmakers.

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According to recent ET reports, India's pharmaceutical industry has been closely monitoring evolving US trade policies amid concerns over potential tariffs on medicines.

Industry executives have maintained that while India's cost-efficient manufacturing ecosystem remains globally competitive, prolonged tariff barriers could encourage companies to expand manufacturing capacity within the US or increase contract manufacturing partnerships to retain market access.

The latest decision also marks a shift from earlier measures targeting branded medicines.

Last year, several multinational drugmakers reached agreements with the US government that protected billions of dollars worth of pharmaceutical imports from tariffs.

In April, the Trump administration had also introduced measures under which branded pharmaceutical imports could face steep duties unless manufacturers agreed to government pricing arrangements or committed to domestic production.