China Faces Challenges in Raw Material Drug Exports After US Tariff Hike

The recent announcement by the US government to impose "reciprocal tariffs" has raised concerns about the competitiveness of China’s raw material drug exports. According to the policy, a 34% tariff will be applied to Chinese goods, exceeding the 26% imposed on India. Considering that both nations dominate the global supply chain for pharmaceutical raw materials, this disparity poses potential risks to China’s market position.

Increased Costs and Competitive Pressure

Raw material drugs account for nearly 80% of China’s Western medicine exports, with the United States being a significant trading partner. In 2024, China's raw material drug exports reached $429.8 billion, growing by 5.1% year-on-year. Exports to the US alone amounted to $45.2 billion, reflecting a 12% growth. However, the additional tariffs could reduce the cost-effectiveness of Chinese products in the US market.

Industry insiders have expressed concerns over rising expenses. A company spokesperson mentioned that negotiations with clients are ongoing to mitigate the impact. However, not all businesses are affected equally. Some firms manage their US sales through local subsidiaries, which shields them from tariff repercussions.

India’s Competitive Edge and China's Resilience

India has long been a competitor in the pharmaceutical sector, leveraging lower costs and compliance with international standards. However, China's supply chain advantages and technological edge remain critical. Despite US tariffs, approximately 50% of key raw material drugs in India still depend on Chinese inputs.

Experts also highlight that India's PLI (Production Linked Incentive) program aimed at boosting its pharmaceutical industry has yet to meet expectations. Meanwhile, China's R&D investments and its control over essential upstream resources continue to give it a strategic edge.

Strategic Adjustments for the Future

While the tariff hike may exert short-term pressure, it also serves as a wake-up call for Chinese pharmaceutical exporters. Suggestions from industry veterans include:

• Enhancing product innovation to strengthen global reliance on Chinese technology.
• Expanding into European and Belt and Road markets to diversify dependencies.
• Deepening collaborations with multinational pharmaceutical companies to integrate further into global supply chains.