Pharmaceutical stocks took a beating in trade on April 9, after U.S. President Donald Trump reiterated his plans to impose heavy tariffs on pharmaceutical imports, in an attempt to reshore drug manufacturing to the U.S.

“We’re going to be doing something very big on drug imports — a major tariff is coming,” Trump told the audience. “We want these companies to make their products here, in America, not in China or elsewhere.”

Speaking at an event hosted by the National Republican Congressional Committee, Trump said the move is intended to reduce American dependence on foreign drug supplies and revitalise domestic pharmaceutical production. However, Trump did not provide specific details on the scale or timeline of the proposed tariffs.

This is likely to significantly impact domestic pharma players, that depend on exports of generic drug formulations to the U.S. for a large portion of their sales.

At 9.20 am, the Nifty Pharma index tumbled two percent to 19,964.10, with all constituents in the red. Lupin, Gland Pharma and Zydus Lifesciences were the top losers on the index, falling up to five percent.

Since President Trump announced that pharma imports would be tariffed as well, the Nifty Pharma index has cracked nearly five percent. Over the past six months, the index is lower by around 14 percent, as investors trimmed their exposure to pharma-related equities.

However, international brokerage CLSA allayed concerns, stating that the risk of high tariffs on pharma products is low. CLSA believes that the risk is lower than the markets are currently pricing in, as U.S. healthcare system sees major savings benefits as a result of Indian generics. Indian companies contributed 46 percent of generic savings to the U.S. healthcare system.

Further, the Hong Kong-based brokerage believes that even if tariffs are imposed, Indian drug makers are likely to pass on the costs, given their dominant market share.

However, if these Indian pharmaceutical players are unable to hike their costs, it may result in a shutdown of production. Generic products can command only very low margins; therefore, if they are unable to increase prices, they could stop manufacturing, which would result indrug shortages in the U.S.

CLSA noted that India currently imposes a 5–10 percent customs duty on pharmaceutical imports from the U.S., which could set the stage for reciprocal tariffs of up to 10 percent on Indian pharma exports to the U.S.

But, given that India collects less than $50 million in customs duty from U.S. pharma imports, the government is likely to consider removing this duty altogether. If that happens, the U.S. may reciprocate by holding off on any reciprocal tariffs, which could ease concerns for Indian pharma exporters.