Pharma wins temporary reprieve as Trump announces exemption from new tariffs

In a move that provides a temporary reprieve for pharmaceutical companies, President Donald Trump has announced that pharmaceutical products will be exempt from sweeping new tariffs targeting major US trade partners. 

This decision, according to Bloomberg, comes as a victory for drug companies, many of whom have been actively lobbying for an exemption from the tariffs.

On April 2, Trump revealed the imposition of reciprocal tariffs on over 60 countries, including members of the European Union and Switzerland. These new levies, which affect a broad range of products, notably exclude pharmaceuticals for now, though the industry could still face tariffs in the future. According to a fact sheet released by the White House, drugs and certain other products, some already subject to existing tariffs, are not included in the new wave of levies.

In his announcement, Trump reinforced his administration’s commitment to bolstering domestic manufacturing, stating, “We are going to produce the cars and ships, chips, airplanes, minerals and medicines that we need right here in America.” He continued, “The pharmaceutical companies are going to come roaring back, they are coming roaring back, they are all coming back to our country because if they don’t they got a big tax to pay. And if they do, I’ll be very happy.”

In response to anticipated tariff impacts, several pharmaceutical giants, including Eli Lilly, Johnson & Johnson, and Merck, have already committed to expanding their manufacturing operations in the US. Eli Lilly, for instance, has pledged $27 billion to build four new manufacturing sites in the United States. Trump also mentioned that Johnson & Johnson has committed $55 billion to further develop US production facilities, while Merck has earmarked approximately $8 billion for investment by 2028.

While the exclusion of pharmaceutical products from the current tariffs represents a win for the industry, questions remain about whether other sectors of the pharmaceutical market, such as generics, antibiotics, and medical devices produced abroad, might be impacted in the future.

The reciprocal tariffs, which are paid by US companies importing products from foreign countries, will vary by nation, with rates ranging from 10% to more than 40%. To determine these rates, the US Trade Representative’s Office used a formula designed to balance trade deficits between the United States and its global partners. The formula takes into account several factors, including regulatory hurdles, environmental reviews, differences in consumption tax rates, and potential currency manipulation.

According to the statement, the formula aims to level the playing field by addressing tariff and non-tariff policies that have created persistent trade deficits. The intention is to offset these trade imbalances by applying fair and reciprocal tariff rates. The move aims to reduce imports from nations with which the US maintains a trade deficit, potentially easing the burden on domestic industries.