In a significant relief for India’s $50 billion pharmaceutical export sector, China has slashed its 30% import duty on Indian pharma products to zero, effective immediately following the announcement on September 28, 2025. This duty-free access opens a lucrative $10-15 billion market opportunity for Indian exporters, particularly as the US—India’s largest pharma destination—imposes a crippling 100% tariff on branded and patented drug imports starting October 1, 2025. The move, timed amid heightened US-India trade tensions under President Trump, could redirect 20-30% of India’s $3.7 billion half-year pharma exports from the US to China, bolstering bilateral ties post the Shanghai Cooperation Organisation summit.
For Indian pharma majors like Sun Pharma, Dr. Reddy’s, and Cipla—reliant on generics for 47% of US supplies—this pivot offers a buffer against tariff-induced cost hikes, potentially preserving $1-2 billion in annual revenues. As global supply chains realign, China’s concession—framed as a “strategic partnership” by Beijing—highlights shifting alliances in the $1.5 trillion pharma trade. Let’s explore the details, drivers, and ripple effects.
The Tariff Cut: Zero Duty on All Indian Pharma Imports
China’s decision eliminates the 30% levy across Indian pharmaceutical categories, including generics, APIs (active pharmaceutical ingredients), and formulations, unlocking duty-free entry into its vast market. This applies to the $10-15 billion potential for Indian exports, where China already imports 20% of its drugs from India, per industry estimates.
Breakdown of the shift:
| Aspect | Pre-Cut (30% Duty) | Post-Cut (0% Duty) | Impact on Indian Exporters |
|---|---|---|---|
| Cost Savings | 30% added to landed price | Zero additional levy | 20-25% price competitiveness boost vs. rivals |
| Market Access | Limited to essentials | Full portfolio (generics, APIs) | Potential $2-3B annual exports by 2027 |
| Volume Potential | ~$5B current imports from India | Up to $15B opportunity | Redirect 20-30% from US market hit by tariffs |
The concession was revealed during high-level talks at the SCO summit, where PM Modi and President Xi Jinping emphasized “mutual economic benefits” amid US trade barriers.
Context: US 100% Tariff Squeeze Forces Diversification
The timing is no coincidence: On September 25, 2025, President Trump announced a 100% tariff on branded or patented pharma imports starting October 1, exempting only firms building US plants—a direct hit to India’s 47% share of US generics and 15% biosimilars. India’s pharma exports to the US totaled $7.5 billion in FY25, but the levy could inflate costs by 20-30%, eroding margins for firms like Dr. Reddy’s (50% US revenue) and Zydus (30-40%).
Trump’s rationale: “National security and deficit reduction,” but exemptions for US-builders (e.g., Sun Pharma’s $1B Ohio plant) offer a loophole. China’s zero-duty counter-move—framed as “reciprocal goodwill”—capitalizes on this, with Beijing eyeing India’s low-cost generics to meet its $200 billion domestic demand.
Implications: A $2-3 Billion Lifeline for Indian Pharma
This tariff elimination could redirect 20-30% of US-bound exports to China, preserving $1-2 billion in revenues and stabilizing jobs for 3 million in the sector. Benefits include:
- Cost Edge: Zero duty makes Indian drugs 20-25% cheaper than European rivals, boosting volumes in anti-infectives and oncology.
- Supply Chain Shift: Reduces India’s 60% API reliance on China, fostering balanced trade (India’s $5B pharma surplus with China).
- Stock Boost: Shares of Sun Pharma (+2%), Dr. Reddy’s (+1.5%) rose on the news, per BSE data.
Risks: China’s domestic API push could cap long-term gains, and US exemptions for local plants may soften the tariff blow. Industry body Pharmexcil hails it as a “strategic pivot,” urging faster PLI scheme utilization for self-reliance.
Conclusion: China’s Zero-Duty Olive Branch – A Pharma Lifesaver in Trade Wars
China’s cut of the 30% tax on Indian pharma imports to zero arrives as a strategic counterpunch to US tariffs, unlocking a $10-15 billion market and easing pressures on India’s export powerhouse. As bilateral ties warm via SCO, this could sustain $2-3 billion in redirected flows, but diversification remains key. For Indian pharma, it’s not just relief—it’s a new growth frontier.
