India’s medical device industry faces US tariff shock—what’s next?

The move threatens to disrupt supply chains, slow industry growth, and create new barriers for manufacturers looking to expand in the world’s largest healthcare market.

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The Export Promotion Council of Medical Devices, under the Department of Pharmaceuticals and the Department of Commerce, has submitted preliminary inputs to the government, analyzing the tariff’s impact and outlining potential countermeasures. The council has emphasized the need for fair trade practices and called for bilateral negotiations during the upcoming India-US Free Trade Agreement (FTA) discussions later this year.

"Consider imposing strategic tariffs on US medical device imports to balance the trade dynamics. Utilize platforms like the Trade Policy Forum to negotiate fairer trade terms and address mutual concerns," it added.

Mint has reviewed a copy of the report.

A strategic response

In its report, the council has suggested a range of strategic responses.

One proposal calls for reciprocal tariffs on US medical device imports to rebalance trade, with negotiations at the Trade Policy Forum to ensure fairer terms.

The report also stresses the importance of regulatory alignment, urging streamlined approvals from the US Food and Drug Administration (FDA) and the development of shared regulatory standards to facilitate smoother market access for Indian manufacturers.

Another key recommendation is strengthening border controls and customs checks to prevent tariff circumvention through third countries. Additionally, the council has urged the government to expand the Production-Linked Incentive (PLI) scheme, boost investment in R&D, and promote self-reliance in medical device manufacturing, positioning India as a stronger player in the global market.

In FY24, India’s medical device exports to the US stood at $714.38 million, while US exports to India were more than double at $1.52 billion, highlighting a significant trade imbalance.

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India has long been a key supplier of cost-effective, high-quality medical devices to the US, particularly in low-risk, high-volume categories such as catheters, syringes, cannulas, and extension lines.

The new tariff threatens to squeeze these exports, potentially eroding India's market share in a sector where it has been a reliable player.

“Strengthening domestic manufacturing capabilities and investing in innovation will position India as a competitive player in the global medical device industry," said an official familiar with the matter. “By proactively addressing both tariff and non-tariff barriers, India can mitigate the impact of US trade restrictions and secure a stronger presence in international markets."

Challenges beyond tariffs

While some experts believe India may gain a slight cost advantage over China, which faces a higher 34% tariff, others argue that the real challenge lies in regulatory barriers rather than tariffs alone.

“While India may seemingly gain a marginal price advantage over China (8%) in certain low-risk, high-volume consumables, the real impact may not be significant if our prices were higher than 15% and the impact has to be further studied compared to other competing nations," said Himanshu Baid, managing director of Poly Medicure Ltd, a medical device manufacturer specializing in infusion therapy, oncology, anesthesia, respiratory care, urology, gastroenterology, surgery, dialysis, and more.

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However, Baid pointed out that non-tariff barriers, such as stringent FDA regulations, remain a bigger obstacle than tariffs themselves.

“Regulatory hurdles in the US are steep, with FDA (US Food and Drug Administration) approval costs ranging from $9,280 to over $540,000, whereas US exporters face relatively minimal costs when entering India. Addressing these imbalances through bilateral collaboration is crucial," he added.

India’s medical devices market, valued at $11 billion in 2022, is projected to grow to $50 billion by 2030, with a CAGR of 16.4%. However, with high US tariffs and strict regulatory controls, Indian manufacturers may have to rethink their market strategies.

“India must prioritize healthcare security by strengthening domestic manufacturing and reducing dependency on foreign markets," said Rajiv Nath, forum coordinator, AiMeD, urging the government to advocate for a balanced approach to tariffs and regulatory policies in bilateral negotiations.

India remains the fourth-largest medical devices market in Asia, after Japan, China, and South Korea, and ranks among the top 20 globally. But Nath warned that high tariffs will give US manufacturers an overnight boost, allowing them to expand capacity utilization and gain market share at India's expense.

Beyond tariffs, non-tariff barriers such as the Buy American policy for government procurement could make the US a less attractive market for Indian exporters. As a result, some Indian companies may find it more viable to invest in US-based manufacturing for certain products instead of exporting from India, Nath added.

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The 27% reciprocal tariff on Indian exports to the US aligns with global trends, with China facing 34%, Europe 20%, Vietnam 46%, Taiwan 32%, Japan 24%, South Korea 25%, Switzerland 31%, Indonesia 32%, Malaysia 24%, and Turkey 10%.

Meanwhile, President Donald Trump has not announced any reciprocal tariffs on India’s pharmaceutical sector.