United States President Donald Trump said on Thursday that he will impose a 100 percent import tax on pharmaceutical drugs. He also announced new tariffs on other products.
Here’s what we know, and what it all means.
What pharma tariffs has Trump announced?
In a post on his Truth Social platform, Trump wrote that starting on October 1, the US will impose a 100 percent tariff on any branded or patented pharmaceutical product.
The 100 percent tariff means prices of imported pharmaceutical products will double for US importers and consumers.
However, Trump said an exception would be made for any company which “IS BUILDING their Pharmaceutical Manufacturing Plant in America”.
He explained that “is building” refers to “‘breaking ground’ and/or ‘under construction'”.
Trump did not specify whether the new tariffs he announced would be applied on top of the national tariffs he has previously imposed on various US trading partners.
Where does the US import pharmaceutical products from?
Pharmaceutical products, including packaged medicaments; vaccines, toxins and cultures; and hormones, made up about 5.6 percent of total US imports in 2023, worth about $158bn, according to the Observatory of Economic Complexity (OEC).
During that year, the US imported $86.4bn worth of packaged medicaments. About 14.2 percent, or $12.3bn worth, of packaged medicaments came from Ireland; 14 percent, or $12.1bn worth, came from Switzerland; 13.4 percent ($11.6bn) from Germany; and 10.6 percent, or $9.2bn worth, came from India.
Other countries from which the US imported these products include Italy, Denmark and the United Kingdom.
In 2023, the US imported $65.1bn worth of vaccines, blood, antisera, toxins and cultures. Out of this, 23.2 percent, or $15.1bn worth, came from Ireland and 20.9 percent, or $13.6bn worth, from Germany.
How have markets reacted to new pharma tariffs?
Pharmaceutical companies across Asia and Europe saw a drop in their share prices following Trump’s announcement.
Swiss companies Lonza, Novartis and Roche were down about 1.2 percent in early trading on Friday.
Shares in German drugmakers Merck and Bayer also fell by 1.1 percent and 1.5 percent, respectively.
Japan’s Sumitomo Pharma closed 3.5 percent lower, while Otsuka Holdings fell 2.9 percent and Daiichi Sankyo dropped 2 percent. Not all pharma groups took a hit, however. Takeda Pharmaceutical edged down just 0.1 percent, while Shionogi, instead of falling, rose 1 percent.
Meanwhile, in India, the main pharmaceuticals index slid by 2 percent as all 20 listed drugmakers fell in price. Industry giant Sun Pharmaceutical Industries sank 3 percent, despite Indian drugmakers mainly producing generics, which are not targeted by new tariffs.
Australia’s largest biotechnology company, CSL, plunged to a six-year low, closing 1.9 percent below the previous day.
How will the pharma industries be affected?
Despite the initial shock reflected in share prices, experts said Indian companies should not suffer too much from the tariffs, as some that supply products to the US are already based there and will therefore be exempt.
Namit Joshi, chairman of the Pharmaceutical Export Promotion Council of India, told CNN that the tariffs are “unlikely to have an immediate impact on Indian exports”.
“The bulk of our contribution lies in simple generics, and most large Indian companies already operate US manufacturing or repackaging units and are exploring further acquisitions,” Joshi said.
However, the uncertainty over whether the tariffs might be extended to generic medicines too weighs heavily on the Indian industry at a time when the country is already grappling with 50 percent tariffs imposed on other sectors by Trump earlier in the year. These were, in part, due to India’s continued purchase of Russian oil, Trump said.
Other foreign pharmaceutical companies will also get around tariffs by locating their operations in the US, some experts said.
“The US market is the world’s largest destination for branded and speciality drugs,” Adam Butlin, a pre-doctoral research assistant in the Centre for Economic Performance at the London School of Economics, told Al Jazeera. “Over the medium term, firms may attempt to redirect exports to other regions to circumvent tariffs, while in the longer term, some foreign producers may consider relocating production to the US.”
But that will not be easy.
“Such moves are constrained by the high costs of rebuilding supply chains and the policy uncertainty that discourages large-scale, long-term investment,” Butlin said.
In the meantime, that unpredictability means that “exporting economies with significant exposure, such as India, Switzerland, and parts of the EU, could see a significant fall in competitiveness”.
What effect could these tariffs have on the US pharma sector?
The pharmaceutical industry group, Pharmaceutical Research and Manufacturers of America (PhRMA), warned that tariffs could affect investment in US pharmaceuticals.
“PhRMA companies continue to announce hundreds of billions in new US investments thanks to President Trump’s pro-growth tax and regulatory policies,” Alex Schriver, senior vice president at PhRMA, said in a statement. “Tariffs risk those plans because every dollar spent on tariffs is a dollar that cannot be invested in American manufacturing or the development of future treatments and cures.”
Furthermore, he said, medicines are usually spared from tariffs to avoid higher costs and shortages.
Butlin said the impact of this policy on the US pharmaceutical industry is “ambiguous”.
“On one hand, domestic manufacturers may benefit from a reduction in foreign competition and new incentives to reshore parts of the supply chain. However, consumers, hospitals, and insurers will face higher drug prices and possible shortages, especially in areas where no domestic substitutes exist.”
In the long run, the new policy may encourage more local investment in making medicines. But it could also raise healthcare costs and slow down innovation, if companies cut back on research to make up for the extra expenses, Butlin added.
What other tariffs did Trump announce on Thursday?
In another post on Truth Social, Trump wrote that the US will also impose a 50 percent tariff on all kitchen cabinets, toilet vanities and “associated products” and a 30 percent tariff on upholstered furniture.
Upholstered furniture refers to any furniture that includes padding, springs and fabric or leather coverings.
In a separate post, he announced a 25 percent tariff on “Heavy (Big!) Trucks” imported by the US from other countries.
These tariffs will also go into effect on October 1.
Why is Trump imposing these tariffs?
Trump did not specify his reasons for increasing tariffs on branded pharmaceutical products.
However, he wrote that the tariffs on kitchen and toilet materials, as well as furniture, were down to “the large scale ‘FLOODING’ of these products into the United States by other outside Countries”.
Trump called this “flooding” unfair.
“We must protect, for National Security and other reasons, our Manufacturing process,” he wrote.