Trump’s Tariff Warning Sparks Massive Sell-Off in Pharma Stocks

The Nifty Pharma index crashed 6% on April 5, marking one of its steepest declines in recent months, after US President Donald Trump indicated that fresh pharmaceutical tariffs would be announced soon. The sharp fall in pharma stocks erased all gains from the previous trading session, as investor sentiment turned highly negative.

Trump’s Statement and Its Impact on Pharma Sector

While speaking to reporters aboard Air Force One, Trump made a clear statement regarding the pharmaceutical sector’s separate classification in his administration’s trade policy.

“We are considering pharmaceuticals as an individual category. An announcement regarding this will be made in the near future, not too far off. It is currently under examination.”

• Trump emphasized that pharmaceutical tariffs would be at levels “never seen before”, sparking widespread panic among investors.

• Pharma stocks, which had rallied on April 3 after initially being excluded from the new US trade tariffs, saw a complete reversal in sentiment.

• The US government is expected to review pharmaceutical imports under Section 232 of the Trade Expansion Act of 1962, which gives the President authority to impose trade restrictions on goods deemed a threat to national security.

Pharma Stocks Tumble, Aurobindo Pharma Plunges 10%

The sharp sell-off in the pharmaceutical sector saw major stocks posting heavy losses:

• Aurobindo Pharma was the worst hit, crashing 10% and hitting the lower circuit.

• Sun Pharma, Cipla, Dr. Reddy’s Laboratories, and Lupin all fell between 5-7%, dragging down the entire index.

• Divi’s Laboratories and Biocon also witnessed sharp declines, as foreign institutional investors (FIIs) offloaded shares.

The sell-off was not limited to individual stocks, as the entire Nifty Pharma index recorded its steepest one-day decline in months.

Why Pharma Stocks Crashed – Key Concerns

1. Uncertainty Over New US Tariffs

   • Investors fear hefty import duties on Indian pharma exports to the US, which could impact revenue and margins for major drugmakers.

   • The US is India’s largest pharmaceutical export market, and any tariffs could severely hurt earnings.

2. Sector Reclassification Under Section 232

   • The Trump administration’s review of pharma imports under national security laws signals long-term risks for Indian drugmakers.

   • If classified under Section 232, pharma imports could face strict restrictions, leading to a major business disruption.

3. Reversal of Recent Gains

   • Pharma stocks had surged on April 3, after initially being excluded from US trade tariffs.

   • However, Trump’s fresh remarks erased investor confidence, leading to heavy selling.

The Nifty Pharma crash highlights the vulnerability of Indian pharmaceutical companies to global trade policies. With Trump signaling fresh tariffs and a sector-wide review under national security laws, investors are dumping pharma stocks amid rising uncertainty.

If the US imposes hefty import duties, Indian drugmakers could face a prolonged period of revenue pressure. Until clarity emerges on Trump’s tariff decision, volatility in pharma stocks is expected to persist.

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