The Indian rupee slipped by five paise in early trade on September 26, following a surprise announcement from US President Donald Trump imposing 100% tariffs on branded or patented pharmaceutical products imported into the US.
The rupee opened flat at 88.6875 against the US dollar but quickly eased to 88.72, compared to the previous close of 88.6725. So far this month, the rupee has weakened 0.5 percent, weighed down by foreign investor outflows of nearly $1.3 billion.
The tariff announcement sent ripples across Asian markets, with most regional currencies trading weaker. The Taiwanese Dollar fell 0.42 percent, Thai Baht 0.26 percent, Malaysian Ringgit 0.21 percent, and South Korean Won 0.12 percent, according to Bloomberg data.
In a note, Mitsubishi UFJ Financial Group (MUFG) said that it remains unclear how “branded or patented” drugs will be defined but suggested that India may escape direct impact since its exports to the US are mostly generic drugs.
Currency experts said that the rupee is testing crucial levels. “The up move appears driven more by tariffs and visa fee hikes than by broad dollar strength. A close below 88.20 would mark the first sign of a potential trend reversal,” said Amit Pabari, MD at CR Forex Advisors.
Market participants expect the Reserve Bank of India (RBI) to step in if the rupee weakens further towards the 89/$ mark. Reports suggest that the central bank may have already intervened on September 25 to arrest further depreciation.
Trump’s move, set to take effect from October 1, 2025, targets not only pharmaceuticals but also other sectors. The US will levy a 50% tariff on kitchen cabinets, 30% on upholstered furniture, and 25% on heavy trucks unless companies start manufacturing domestically.
“The message is clear — build in America, or face tariffs,” Trump wrote on Truth Social, emphasizing that products will be exempt from tariffs if construction of a US facility has already begun.
For India, which supplies more than a third of America’s pharmaceutical needs, primarily as affordable generics, the impact remains to be seen. For now, all eyes are on the rupee’s next move — and on whether trade talks bring relief to emerging market currencies.