At long last, the Trump administration’s much-ballyhooed tariffs on pharmaceutical imports are materializing in a trade deal with the European Union. Still, as with previous communications on the duties, several key questions remain.
As part of a trade agreement reached Sunday between the U.S. and the EU, pharmaceutical imports—along with almost all goods entering the U.S. from the bloc—will be subject to a 15% tariff, according to a White House fact sheet issued Monday.
The baseline 15% rate is separate from the sector-specific tariffs President Donald Trump has proposed multiple times this year, and it isn’t entirely clear how those sectoral tariffs—and the results of a Section 232 investigation into the national security implications of U.S. pharmaceutical imports—might add to or replace the rate agreed to on Sunday.
The U.S. Department of Commerce did not respond to Fierce Pharma’s request for clarification by publication time.
Another potential hitch is how the U.S. defines “pharmaceuticals” under the trade deal, and whether that label includes all pharmaceutical products or just finished drugs. Certain generic drugs are excluded under the current plan, though it isn’t immediately clear which ones, according to analysts at Jefferies and multiple news reports.
All told, the trade deal could cost the pharmaceutical industry between $13 billion and $19 billion, Reuters reported, citing analyst commentary. Nevertheless, the outcome is “‘less bad’ than expected,” the Jefferies team wrote in a note to clients Monday.
The 15% tariff rate on pharmaceuticals and other goods provides the industry with clarity and should be manageable for major drugmakers, most of whom already have significant manufacturing operations in the U.S., the Jefferies analysts explained.
Importantly, the tariffs have not yet gone into effect and will not until the conclusion of the Trump administration’s Section 232 investigation into pharmaceutical imports, according to the Jefferies note. The outcome of that probe—the likes of which have been used to impose tariffs on imports like steel and automobile parts in the past—is due by August, CNBC reported Tuesday.
CNBC echoed the uncertainty about the potential interplay between 232 tariffs and the broad 15% tariffs unveiled Sunday, citing a quote from European Commission president Ursula von der Leyen that suggested Europe would be excluded from an impending U.S. announcement on pharmaceutical-specific duties.
Multiple analysts warned the news outlet that any additional pharmaceutical trade penalties on top of the 15% rate would risk tanking the U.S.-EU trade deal.
Even if the 15% rate is a better-than-expected outcome from the industry, it’s still not ideal.
Tariffs are a “blunt instrument” that will likely scramble supply chains, impact R&D investment and “ultimately harm patient access to medicines on both sides of the Atlantic,” the European Federation of Pharmaceutical Industries and Associations (EFPIA) wrote in a statement on the trade deal Monday.
Across the pond, U.S. trade group the Pharmaceutical Research and Manufacturers of America (PhRMA) said it was still awaiting further details on the EU agreement but noted that the pharmaceutical industry “shares President Trump’s goal to revitalize American manufacturing.”
That said, tariffs on pharmaceuticals run “counterproductive to this goal,” the trade group’s SVP of public affairs, Alex Schriver, said in an emailed statement.
“Every dollar spent on tariffs is a dollar that could be used to advance American manufacturing or to develop innovative treatments and cures,” the statement continued. “Further, tariffs on medicines can increase costs and lead to shortages.”
The industry has been wringing its hands over the threat of potential pharmaceutical tariffs for the better part of 2025. However, when the expected drug duties were exempted during Trump’s “Liberation Day” tariff reveal in early April, the situation went into a holding pattern, with vague promises of tariff implementation periodically resurfacing from the administration throughout the first half of the year.
Earlier this month, Trump reintroduced the prospect of implementing tariffs as high as 200% on foreign-made pharmaceutical products during a cabinet meeting. He also teased a grace period of at least a year to give drugmakers time to shift their operations to the U.S.
Once that grace period is up, companies are “going to be tariffed if they have to bring the pharmaceuticals into the country, the drugs and other things, into the country,” Trump said at the time. “They’re going to be tariffed at a very, very high rate, like 200%.”
While the threats have been vague and the influence of the potential tariffs on drugmakers’ stock prices has diminished over time, the policy does seem to have spurred a major U.S. investment boom among large-cap drugmakers.
Earlier this month, Biogen said it would plug $2 billion into its North Carolina operations to build new manufacturing facilities and chart upgrades at its existing campuses in the state. Hikma Pharmaceuticals, for its part, said in late June that it would spend $1 billion by 2030 to bolster its manufacturing and R&D in the U.S.
Meanwhile, Eli Lilly, Johnson & Johnson, Roche and AstraZeneca have all pledged eye-popping investments in the U.S. Lilly has committed $27 billion, while AZ and Roche both pledged $50 billion and J&J has elected to invest $55 billion.