Trump threatens to end pharmaceuticals tariff exemption

US President Donald Trump plans to announce "major" tariffs on imported pharmaceuticals. This could end decades of low-cost global trade in medicines.

For years, many countries, including the US, had few or no tariffs on finished drugs. This was due to a 1995 World Trade Organisation (WTO) agreement aimed at keeping medicines affordable.

Trump recently introduced a 10% tariff on other imports. This is part of his effort to bring manufacturing back to the US. His new "reciprocal" tariffs include a 104% duty on goods from China. These measures intensified a global trade war and shook markets.

Pharmaceutical buyers, previously unaffected by such tariffs, are now preparing for changes. The US typically imports large quantities of finished medicines from India, Europe, and China without paying tariffs. However, active pharmaceutical ingredients (APIs) do face some duties.

At a fundraiser dinner for his Republican Party, Trump said he would soon announce major pharmaceutical tariffs. He stated that these tariffs would make companies leave China.

Last week, he told reporters aboard Air Force One that pharma tariffs would be unprecedented. He promised these details would come "in the near future."

In 2024, the US imported $213 billion worth of medicines. This amount is more than two and a half times what it was ten years ago.

Trump's comments have unsettled buyers reliant on Indian imports. India supplies nearly half of all US generics, saving billions in healthcare costs.

Following Trump's announcement, Indian pharma stocks fell sharply. India sends about one-third of its $13 billion annual pharma exports to the US.

Currently, Americans pay little or no tax on Indian medicine imports. In contrast, Indians pay nearly 11% duty when importing American medicines.

Indian drugmakers warn that new tariffs could raise prices in the US. Many firms like Cipla and Dr Reddy's have plants in the US but moving production is not feasible for low-margin generic drugs.

European drugmakers are also concerned about potential tariffs. After a meeting between European Commission President Ursula von der Leyen and top pharma firms, warnings were issued about shifting production away from Europe to the US.

The European Federation of Pharmaceutical Industries and Associations (EFPIA) expressed concerns over rising tariffs disrupting Europe's role in global pharmaceutical production. In 2024, pharmaceuticals were the EU's largest export to the US at $127 billion.

Major companies urge swift action from the EU to enhance competitiveness and prevent a "mass exodus" to the US. They worry about potential EU retaliatory tariffs disrupting supply chains and affecting patients on both sides of the Atlantic.

Global pharma giants like GSK and Pfizer operate across multiple countries such as Ireland and Germany. New tariffs could disrupt various parts of their supply chains.