Declaring a national emergency, President Donald Trump on Wednesday unveiled sweeping tariffs meant to “address the injustices” of global trade and bring manufacturing back to the U.S. However, pharmaceuticals won’t be subject to the reciprocal tariffs, according to a White House fact sheet.
“We think impacts to biotech and pharma should be minimal because pharmaceuticals are exempted from the new tariffs,” Jefferies analysts wrote in a note to investors. “The President has mentioned [potential] for tariffs on pharmaceuticals/API which could come ‘at some point’.” But for now, they see “minimal impact to biopharma.”
At the same time, Jefferies analysts said it remains unclear “how the new tariffs could impact other elements of drug manufacturing — for example API components of drugs that may also be imported.”
Trump on Wednesday signed an executive order imposing a 10% tariff on all countries as well as individualized tariffs set at half what he said those countries charge on U.S. exports. Among the additional duties, the U.S. will impose a 34% tax on imports from China, 26% on India, and 20% on the European Union (EU).
However, the White House fact sheet noted that some goods — including pharmaceuticals — will not be subject to the reciprocal tariffs.
The Indian Pharmaceutical Alliance (IPA), which includes 23 generic pharmaceutical companies, issued a statement on the announced U.S. tariffs of 26% on imports from India and exemption for pharmaceuticals.
“Thank you, President Trump, for exempting pharmaceuticals from America’s new reciprocal tariff policy,” Kathleen Jaeger, U.S. spokesperson for the IPA, said in a statement. “Nearly 90% of all medicines prescribed in the United States are generic, and half of those medicines are made by IPA member companies."
However, European Commission President Ursula von der Leyen in a statement called Trump’s tariffs a “major blow” to the global economy, including the EU with the “largest single market in the world” with 450 million consumers. “Medication will cost more,” von der Leyen warned.
A survey released last week by the Biotechnology Innovation Organization (BIO) found a “staggering” 94% of U.S. biotech companies expect “surging” manufacturing costs, if tariffs are placed on imports from the EU.
“Proposed tariffs on the EU would force 50% of companies to scramble for new research and manufacturing partners,” according to BIO, with 80% of biotech companies surveyed indicating that they would need at least 12 months to find alternative suppliers — while 44% would require more than two years.
Jefferies analysts said they will continue to follow the potential for Trump’s tariffs to bring biopharma manufacturing back to the U.S. On Wednesday, Trump called out Johnson & Johnson’s plans to invest more than $55 billion and Eli Lilly’s $27 billion investment in U.S. manufacturing.
Pharmaceutical companies are “coming roaring back” to the U.S., Trump said. If they don’t, he added that “they’ve got a big tax to pay.” Trump has previously threatened to impose a 25% across-the-board tariff on pharmaceuticals.
