President Donald Trump‘s proposed 100% tariffs on pharmaceuticals could have a smaller impact than initially expected, thanks to certain loopholes. However, the pharmaceutical industry, particularly Big Pharma, remains displeased.
Trump's Drug Tariff Probe Rattles Asian Markets
The proposed tariff is part of a Section 232 probe initiated by Trump to investigate whether medical products from China, Vietnam, and Malaysia pose a national security risk, reported Fortune. This move is expected to affect U.S. consumers and exporters in these countries.
Oxford Economics' analyst Louise Loo says, “The drug tariffs will be a meaningful commercial hit for US consumers.”
Investors have already felt the impact of this news, with Asian markets experiencing a downturn. However, some American pharmaceutical companies, such as Pfizer (NYSE: PFE), Eli Lilly (NYSE: LLY), and Bristol-Myers Squibb (NYSE: BMY), have seen a rise in their premarket shares.
Loopholes May Limit Full Impact Of New Drug Tariffs
However, there are some loopholes in the proposal that could potentially limit its impact. For instance, generic drugs are not included in the tariff. Companies that can demonstrate ongoing construction projects may also be exempt. Additionally, companies in Japan and Korea are shielded by trade-deal safeguards.
Despite the potential loopholes, the tariff is expected to have a substantial impact on U.S. consumers, as Asia supplies over 20% of US pharmaceutical imports by value. However, the White House may be forced to relax some standards, which could mitigate the effective tariff burden.
Additionally, companies with manufacturing facilities in the U.S. may also be shielded. Several drug companies have pledged to invest $350 billion in U.S. manufacturing and R&D this year, potentially making it easier for them to expand their facilities and avoid the tariffs.
Analyst Loo expects U.S. to “follow up with announcements detailing protections for some categories of products, blunting the effective tariff burden."
Big Pharma Remains Unhappy
The proposed tariffs, announced by Trump on Thursday, could have a significant impact on the pharmaceutical industry. Trump’s move to impose tariffs on pharmaceuticals is part of a broader strategy to protect American manufacturers from “unfair outside competition.”
The administration also announced tariffs on heavy trucks and home furnishings, with the aim of shoring up domestic industry in these sectors.
Nonetheless, major U.S. pharmaceutical companies are openly expressing dissatisfaction. A spokesperson for the Pharmaceutical Research and Manufacturers of America told the WSJ that drug companies are committing hundreds of billions to new U.S. investments. Tariffs put those plans at risk, since every dollar paid in tariffs is a dollar that can't go toward American manufacturing or developing future treatments and cures.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
