Trump Tariffs Unlikely to Hurt Indian Pharma Companies: Morgan Stanley
United States President Donald Trump’s plan to impose 100% tariffs on imported branded and patented pharmaceuticals is unlikely to hurt Indian companies, according to Morgan Stanley. In its latest note, the firm did flag potential risks to companies that have exposure to specialty drug exposure, notably mentioning Sun Pharma.
Understanding the Tariff Plan
The tariff, which was announced by Donald Trump on Truth Social, will take effect from October 1, 2025. The tariffs will apply to any branded or patented drug being imported into the US unless the manufacturer is building a plant in the country. This move is seen as an attempt to encourage pharmaceutical companies to set up manufacturing facilities in the US, thereby creating jobs and boosting the local economy.
Morgan Stanley’s Analysis
Morgan Stanley believes the impact of this move could be limited, as far as the Indian market is concerned. However, companies like Sun Pharma could be at risk due to their specialty drug presence in the US. “Sun, among our coverage, is the only one with Speciality U.S. exposure but has a U.S. plant,” Morgan Stanley said, before admitting that the company’s own domestic facility offers some protection.
Impact on Indian Pharma Companies
As far as the other companies are concerned, Morgan Stanley sees minimal impact on firms like Lupin, Cipla, and Dr. Reddy’s Laboratories, as their business in the US is largely in the generic segment, which is exempt from tariffs, so far. The generic segment is a significant contributor to the revenue of these companies, and the exemption from tariffs is likely to provide a buffer against the potential impact of the tariffs.
Sun Pharma: A Special Case
On the flip side, a portion of Sun’s specialty business could be impacted, but that depends on how the US defines immunity for existing plants in the country. Sun Pharma has a significant presence in the US specialty drug market, and any changes to the tariff structure could affect the company’s revenue and profitability. However, the company’s US plant is likely to provide some protection against the tariffs, and the impact may be limited.
Key Questions Surrounding the Tariffs
The note goes on to ask burning questions surrounding the tariffs, including whether or not the tariffs will be applicable to Active Pharmaceutical Ingredients (APIs) as well. APIs are a critical component of the pharmaceutical industry, and any changes to the tariff structure could have a significant impact on the industry. The clarification on this aspect is eagerly awaited, and it could provide more insight into the potential impact of the tariffs on Indian pharma companies.
Long-Term Impact
Finally, Morgan Stanley concludes that while there may be some short-term impact of the US tariffs, it is unlikely to be sustained in the long term as it would cause unprecedented supply-chain woes and could significantly raise costs in the industry. The pharmaceutical industry is highly complex, and any changes to the tariff structure could have a ripple effect throughout the supply chain. The long-term impact of the tariffs is likely to be limited, and the industry is expected to adapt to the new reality.
Investment Implications
The news is likely to have a mixed impact on the Indian stock market, particularly on pharma stocks. While the tariffs may not have a significant impact on most Indian pharma companies, the uncertainty surrounding the tariffs could lead to short-term volatility in the market. Investors are advised to keep a close eye on the developments and adjust their investment strategies accordingly. Pharma stocks are likely to be in focus in the coming days, and investors should be prepared for any eventuality.
Conclusion
In conclusion, the Trump tariffs on imported branded and patented pharmaceuticals are unlikely to hurt Indian companies, except for those with specialty drug exposure like Sun Pharma. The impact of the tariffs is likely to be limited, and the industry is expected to adapt to the new reality. Investors should keep a close eye on the developments and adjust their investment strategies accordingly.
