While the omission of pharmaceuticals from President Donald Trump’s much-anticipated reciprocal tariffs gave the industry a momentary reprieve, renewed threats of drug duties—which have pressured scores of health stocks—suggest any relief is likely short-lived.
Following last week’s “Liberation Day” tariff reveal, which included base tariffs of 10% on most U.S. imports and a slew of country-specific reciprocal tariffs, Trump said on Tuesday that the U.S. will imminently announce a “major” tariff on pharmaceutical imports.
As the president has communicated previously, the duties are being leveraged in part to incentivize drugmakers to shift manufacturing and other operations to the U.S., Reuters reported, citing comments made by Trump during a dinner at the National Republican Congressional Committee this week.
“We’re going to be announcing very shortly a major tariff on pharmaceuticals,” Trump said at the event, as quoted by Politico. “And when they hear that, they will leave China. They will leave other places because they have to sell—most of their product is sold here and they’re going to be opening up their plants all over the place.”
Trump made similar comments last Friday, telling reporters aboard Air Force One that pharma tariffs would soon arrive “at a level that you haven’t really seen before,” according to a separate Reuters report.
“That will be announced in the near future, and is under review right now,” the commander in chief said.
Trump has yet to elaborate on the shape the pharmaceutical-specific tariffs will take. During a Cabinet meeting in late March, Politico quoted Trump as saying the pharma-targeted trade penalties could come in at “25% or higher.”
Following Trump’s allusion to pharma tariffs on Tuesday, multiple global drugmakers’ shares have dropped, reflecting widespread concerns about the implications of the president’s mounting trade war.
Stocks for U.S. drugmakers like Gilead Sciences, Pfizer, Merck & Co. and Eli Lilly were down between 1.5% and nearly 3% in midmorning trading Wednesday.
As to European pharmas, Novo Nordisk’s stock was down around 2% Wednesday morning, while Sanofi’s dropped about 3.3%, and AstraZeneca’s and GSK’s each fell by roughly 4%.
Though pharmaceuticals appeared to be spared in Trump’s reciprocal tariffs, the duties might still take a toll on the industry depending on how they’re applied.
If active pharmaceutical ingredients—versus finished drugs—are not covered by the “pharmaceutical” exemption, then many of the industry’s concerns about trade barriers would still hold water, Jeff Stoll, U.S. national strategy life sciences leader at the professional services outfit KPMG, said in an interview with Fierce Pharma last week.
And overseas, life sciences leaders are already sounding the alarm about the existential threat Trump’s trade restrictions could pose to Europe’s health and medicine industries.
Unless the bloc can bring about “rapid, radical policy change,” pharmaceutical R&D and production is “increasingly likely to be directed towards the U.S.,” pharma CEOs in the European Federation of Pharmaceutical Industries and Associations (EFPIA) told European Commission President Ursula von der Leyen this week.
To tackle the issue, the CEOs pointed to actions like strengthening the region’s competitive commercial market, intellectual property protections, regulatory framework and policy coherence. The pharma leaders did not offer specific suggestions on how to deal with potential U.S. tariffs, despite the EFPIA noting that trade duties would create “little incentive to invest in the EU and significant drivers to relocate to the U.S.”
As for the reshoring angle, motivating drugmakers to set up production on U.S. soil is one thing, while getting them to do so in a timely manner—and before another administration sweeps the White House—is another matter entirely.
“It’s not like you can sole source the full manufacturing of many drugs just to the United States or pick your favorite friendly [country] that we have the lowest tariffs on,” KPMG’s Stoll told Fierce Pharma last week, cautioning companies against making any major manufacturing decisions purely “as a reaction to policy.”
Building a new manufacturing facility from scratch can cost up to $2 billion and take between five and ten years before the plant is up and running, trade organization the Pharmaceutical Research and Manufacturers of America (PhRMA) explains on its website.
In light of those sorts of timelines, both PhRMA and several other large drugmakers have reportedly been lobbying the government in a bid to secure a staggered rollout of any pharma-specific trade taxes.
Meanwhile, domestic biomanufacturing has already been on the upswing in the U.S. in recent years.
Currently, the U.S. boasts 1,591 biopharmaceutical manufacturing facilities across 48 states and Puerto Rico. That number has gradually increased each year from an initial pool of 1,018 plants in 2018, according to a February report (PDF) from PhRMA.