US President Donald Trump said Thursday that he would impose a 100% import tax on medicines. He also announced new tariffs on other products.
This is what we know, and that’s what it all means.
What are the pharma tariffs Trump has announced?
In his true social platform post on Thursday, Trump wrote that from October 1, the US will impose 100% tariffs on branded or patented drugs.
A 100% tariff means that the price of imported medicines will double for American importers and consumers.
But Trump said an exception would be made for companies that “build drug manufacturing plants in America.”
He explained that “building” refers to “broken ground” and/or “under construction.”
Trump did not specify whether the new tariffs he is announcing will apply in addition to the national tariffs he previously imposed on various US trading partners.
Where does the US import medicines?
A drug containing packaged medicines. Vaccines, toxins, cultures. According to the Observatory of Economic Complexity (OEC), it consists of about 5.6% of the total US imports in 2023, and about 5.6%.
That year, the US imported $86.4 billion worth of packaging drugs. Approximately 14.2% of the packaged medicines, or $12.3 billion, came from Ireland. A value of 14%, or $12.1 billion, came from Switzerland. 13.4% ($11.6 billion) from Germany. A value of 10.6%, or $9.2 billion, came from India.
Other countries where the US imported these products include Italy, Denmark and the UK.
In 2023, the US imported $65.1 billion worth of vaccines, blood, antiserum, toxins and cultures. Of this, 23.2%, or $15.1 billion, was worth 20.9%, or $13.6 billion, from Germany.
How did the market respond to new pharmaceutical fees?
Asian and European pharmaceutical companies have seen stock prices fall following Trump’s announcement.
Swiss Lonza, Novartis and Roche fell about 1.2% in early trading on Friday.
Stocks of German drug makers Merck and Bayer also fell by 1.1% and 1.5%, respectively.
Japan’s Sumitomo Pharma was closed 3.5% lower, Osca Holdings fell 2.9%, while Sankyo Island’s Daichi fell 2%. However, not all pharma groups were hits. Takeda’s drugs fell just 0.1%, but Shionogi rose 1% rather than falling.
Meanwhile, in India, the main drug index has slid 2% as prices fell for all 20 listed drug manufacturers. The industrial giant Sun Pharmaceutical Industry has sank 3% despite Indian pharmaceutical companies producing primarily generics.
CSL, Australia’s largest biotech company, plunged to its lowest level in six years, falling 1.9% from the previous day.
How will the pharma industry be affected?
Despite the initial shock reflected in the stock price, experts said Indian companies should not suffer excessively from tariffs.
Namit Joshi, chairman of India’s Pharmaceutical Export Promotion Council, told CNN that tariffs “will not be likely to have an immediate impact on Indian exports.”
“Most of our contributions are in simple generics, with most Indian companies already operating US manufacturing or repackaging divisions and investigating further acquisitions,” Joshi said.
So, while Indian pharmaceutical companies should not be overly affected, the new tariffs will only add the weight of the 50% tariffs that Trump imposed on other Indian sectors at the beginning of the year. These were partly due to India’s continued purchase of Russian oil, Trump said.
Some experts said other foreign pharmaceutical companies would also avoid tariffs by finding business in the US. “The actual comments from the president are direct, but the impact may be vague and negligible,” Jared Holtz of Mizuho Securities, a healthcare equity specialist at Japanese financial services group, told Bloomberg.
“All major players have a production presence within the country, with almost all of them announcing an increase in investments directly related to local manufacturing,” Holtz said.
How can these tariffs affect the US pharmaceutical sector?
Pharmaceutical Industry Group Drug Research and American Manufacturers (PHRMA) warned that tariffs could affect investments in US drugs.
“PHRMA companies continue to announce hundreds of millions of US investments thanks to President Trump’s growth-enhancing tax and regulatory policies,” said Alex Schliver, senior vice president of PHRMA, in a statement. “Every dollar spent on tariffs is a dollar that cannot be invested in American manufacturing or future treatments or developments of treatments, so there is a risk of these plans.”
Furthermore, he said the drugs are usually spared from customs duties to avoid higher costs and shortfalls.
What other tariffs did Trump announce on Thursday?
In another post on the Truth Society, Trump writes that the United States will impose a 50% tariff on all kitchen cabinets, bathroom vanity and “related products” and a 30% tariff on upholstered furniture.
Upholstered furniture refers to furniture that includes padding, springs, and fabric or leather covers.
In another post, he announced a 25% tariff on “heavy (big!) trucks” imported into the US from other countries.
These duties will come into effect on October 1st.
Why is Trump imposing these tariffs?
Trump did not specify why he would increase tariffs on branded medicines.
But he writes that tariffs on kitchen and bathroom materials and furniture have fallen into a massive “flood” of these products into the United States of other countries.”
Trump has made this unfair as a “flood.”
“We must protect our manufacturing processes for national security and other reasons,” he writes.
