President Donald Trump said late Tuesday his administration will begin implementing pharmaceutical tariffs in August, making good on months of threats that initially rankled drug stocks.
But, on Wednesday, the major biopharma exchange traded funds bounded higher following the latest in the ongoing tariff battle. The SPDR S&P Biotech ETF climbed 2.2% while the iShares Biotechnology ETF rose 1.7%. The ProShares Ultra Nasdaq Biotechnology ETF jumped 3.6%.
The pharmaceutical tariffs will initially start low before hiking after a year or so, Trump said in a video posted to YouTube late Tuesday. Earlier this month, Trump threatened to hit pharma companies with an up to 200% tariff on drug imports after a "year, year and a half."
"We're going to start off with a low tariff and then give the pharmaceutical companies a year or so to build and then we're going to make it a very high tariff," he said. "There's two ways you do it. You make money and/or you have them move here so they don't have to pay the tariff."
"The pharmaceutical companies are moving back to America, where they should be," he added.
Pharmaceutical Tariffs: A Lot Still Unknown
Leerink Partners analyst David Risinger said Trump is likely trying to move the needle on building U.S. drug manufacturing before the midterm elections in November 2026.
"But since building new facilities from scratch takes about 3-4 years, the stated clock before tariffs step up to very high levels is very short," he said in a report.
Risinger doesn't expect pharmaceutical tariffs, if implemented in August, to have much of an impact on earnings in the second half of the year. Most companies have already stockpiled enough inventory to shield themselves from tariffs for six to 18 months, depending on the products.
It's important to note that the Trump administration hasn't outlined where in the drugmaking process the tariffs would hit. Pharmaceutical products use active ingredients made in one location, but the products are often finished in another. The intellectual property is often held in an undisclosed location.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
