US President Donald Trump has announced plans to impose “major” tariffs on imported pharmaceuticals, a move that could potentially impact global trade in medicines.
Under a 1995 World Trade Organisation agreement, most countries, including the US, have refrained from imposing tariffs on finished drugs to keep medicines affordable. However, Trump’s recent actions, including a 10% tariff on other imports, signify a shift in policy, aiming to bring manufacturing back to the US.
The introduction of new “reciprocal” tariffs, such as a 104% duty on Chinese goods, has escalated global trade tensions and unsettled markets. Pharmaceutical buyers, who have been mostly exempt from such measures, are now bracing for potential changes.
The US traditionally imports a substantial amount of finished medicines from India, Europe, and China without tariffs, with some duties imposed on active pharmaceutical ingredients (APIs). However, Trump’s recent announcement of impending pharmaceutical tariffs has raised concerns among buyers, particularly those reliant on Indian imports.
The uncertainty surrounding these tariffs has caused Indian pharma stocks to plummet, as India exports a significant portion of its pharmaceutical products to the US. If implemented, these tariffs could force Indian drugmakers to increase prices, potentially raising healthcare costs in the US.
European drugmakers are also wary of the impact of potential tariffs on their industry. Concerns have been raised that tariffs could disrupt production in Europe, prompting a shift towards the US market. Major pharmaceutical companies in Europe are urging swift policy changes to strengthen competitiveness and prevent a mass migration to the US.
With pharmaceuticals being the EU’s largest export to the US in 2024, the industry faces significant risks if tariffs are imposed. Global pharma giants operating across multiple countries could experience disruptions in their supply chains, affecting patients on both sides of the Atlantic.