Trump pauses tariffs on Canada and Mexico, but China still in the crosshairs — what it means potentially for biopharma
President Donald Trump on Saturday announced he was levying a 25% tariff on imports from Canada and Mexico, as well as a 10% additional tariff on products from China, impacting the three biggest U.S. trading partners. On Monday, Trump said he would pause the tariffs on Canada and Mexico for a month, while the tariff on China remains set to take effect on Tuesday.
Trump said he was taking the action in executive orders to hold the three countries “accountable” for “their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country.” However, Monday’s 30-day delays were granted after Mexico agreed to send 10,000 soldiers to the U.S.-Mexico border and Canada promised additional actions to address Trump’s concerns about fentanyl.
Of the three trading partners, the U.S. relies heavily on China for everything from raw materials to active pharmaceutical ingredients (APIs) to biologics.
The Pharmaceutical Research and Manufacturers of America (PhRMA), a Washington, D.C.-based trade group representing biopharmaceutical companies, in an emailed statement to Pharma Manufacturing said the organization shares President Trump’s goal of ensuring the U.S. maintains its global leadership in biopharma innovation and manufacturing.
“As such, trade measures should focus on addressing unfair practices abroad and safeguarding our intellectual property to make sure America retains its position as the world leader in bringing safe and effective medicines to market,” said Megan Van Etten, PhRMA’s vice president of public affairs.
At the same time, while PhRMA said it is “eager” to work with the Trump administration “to find solutions that reduce costs for patients and improve access,” Van Etten noted that “policymakers have historically excluded medicines from tariffs because they increase costs and reduce access.”
It’s a concern also expressed by the Association for Accessible Medicines (AAM), a Washington, D.C.-based trade group representing manufacturers and distributors of generic prescription drugs, which warned that Trump’s tariffs could exacerbate “already problematic” drug shortages in the U.S.
“From the base ingredients to the finished products, U.S. medicines rely on a global supply chain that is already stressed and in need of strengthening.” John Murphy III, AAM’s president and CEO, said in a statement. “Generic manufacturers simply can’t absorb new costs. Our manufacturers sell at an extremely low price, sometimes at a loss, and are increasingly forced to exit markets where they are underwater.”
Despite volume growth and new launches of generics, the overall value of all U.S. generic sales has gone down by $6.4 billion in five years and “tariffs would make this much worse,” according to Murphy, who urged the Trump administration to follow its past practice of opting “not to impose tariffs on generic and biosimilar manufactures.”
In an emailed statement in response to a query from Pharma Manufacturing, an Agilent Technologies spokesperson said “the current U.S. tariffs situation is fluid and uncertain” and the company “politely declines to respond.”
Agilent in September 2024 completed its $925 million acquisition of Biovectra, a Canada-based contract development and manufacturing organization (CDMO) that specializes in biologics, highly potent active pharmaceutical ingredients, and other molecules for targeted therapeutics.
“We’re working in an environment that’s got some elements of volatility and unpredictability about it,” Simon May, president of Agilent’s Life Sciences & Diagnostics Markets Group, told Pharma Manufacturing last month. “We’re all aware of some of the geopolitical forces in play, for example, and there are some significant elements of uncertainty in terms of how that’s going to play out.”
Downplaying potential impacts
Geoff Evans, president of contract manufacturer Eurofins CDMO Alphora in Mississauga, Ontario, Canada, told Pharma Manufacturing last month that he is not “overly concerned” about the potential impact of new tariffs on Canadian products.
“There’s always these disruptions that occur but if you look at the arc of time and relationships, I think this will sort itself out,” Evans commented. “I think we’ll be fine.”
Still, Evans said U.S. tariffs on Canada could create “a bit of short-term uncertainty, which is never great, but there’s a natural rhythm to the North American market that is robust and has been in place for decades.”
Thermo Fisher Scientific CEO Marc Casper in a presentation last month at the J.P. Morgan Healthcare Conference in San Francisco was asked about tariffs on China and other countries. In response, Casper said “which ever tariffs happen, we will be well-positioned — given our global footprint — to navigate that as effectively or more effectively than anybody.”
China is Thermo Fisher’s second largest market, accounting for 8% of the company’s revenue, according to Casper. “We’re the largest player in China but we actually have half the exposure of the industry,” he told the JPM25 conference.
Analyst firm Leerink Partners in a report last week on life science tools suppliers said they see “limited risk” from U.S.-China tariffs and export restrictions “given largely localized or near-localized manufacturing.” According to Leerink, the “vast majority” of manufacturing and/or final assembly for companies like Agilent, Bruker, Danaher, Thermo Fisher, and Waters is in Asian countries — Malaysia and Singapore — Europe or locally in China “with the bulk of China product” for Agilent and Waters “made in China for China.”
Bruker “also assembles in Europe, primarily in Germany, Switzerland, and France,” according to Leerink. “Thus, we see limited risk from tariffs or export restrictions.”
Other tariffs in the offing?
While some companies serving the biopharma industry have expressed optimistic outlooks for a second Trump presidency, the flurry of activity on tariffs in recent days might not be the last from the new administration.
Reuters reported last week that Trump plans to impose tariffs on pharmaceuticals, which could hurt U.S. allies in Asia including Japan and South Korea. South Korea’s exports are expected to fall for the first time in 16 months on U.S. tariff uncertainty and a slower tech sector, according to economists polled by the media outlet and released on Friday.
South Korea is a global biopharma leader, with dominant players like Celltrion and Samsung Bioepis in the biosimilars market. For its part, Celltrion announced last week that it trying to get ahead of any potential Trump tariffs with a proactive plan.
While Trump has not made specific proposals regarding drug tariffs, Celltrion said it has conducted an analysis of different scenarios and has already put in place a “system capable of responding immediately, regardless of how the policy is implemented.” The South Korean manufacturer and exporter of biosimilars said the company’s short-term response is to secure sufficient inventory in the U.S.
As a potential long-term response, Celltrion said it is evaluating the acquisition or establishment of manufacturing facilities in the U.S. capable of producing both finished drug products and drug substances to “create a stable supply chain that is less affected by political and social changes in the U.S.”
However, imposing tariffs on imported drugs could also impact Japanese drugmakers like Astellas, Daiichi Sankyo, Eisai, and Takeda, according to Reuters — which noted that the U.S. market accounted for more than half of Takeda’s revenue and 41% of Astellas’ sales, while adding that it wasn’t clear how much came from imports to the U.S.
In a statement to Reuters, Astellas said it was “always preparing for geopolitical risks to ensure a stable supply of products,” and that the company has “invested in multiple manufacturing sites in the U.S. and would continue to do so.”
Astellas in June 2022 opened a $100 million gene therapy manufacturing facility in Sanford, North Carolina. The 135,000 square-foot, GMP-compliant facility supports clinical- and commercial-scale production of Astellas’ adeno-associated virus vectors for gene therapies. However, in September 2024, Astellas Gene Therapies decided to close its South San Francisco biomanufacturing facility, shifting operations to North Carolina.
