After saying overseas drugmakers would have a “big tax to pay,” Trump spares pharmaceuticals from reciprocal tariffs

After lots of bluster about European countries having the pharmaceutical industry in their grasp, the White House spared pharmaceutical products from its wide-ranging tariff spree — at least for now.

During a speech in Washington outlining the tariffs on what he called “Liberation Day,” President Donald Trump said, “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.”

That seeming tariff threat sent the shares of some drugmakers, like Pfizer, Merck, Novo Nordisk, and Amgen, down in after-hours trading. But shortly after the speech, a “fact sheet” sent out by the White House said pharmaceuticals — along with semiconductors and lumber, among other products — would be spared from so-called “reciprocal” tariffs. 

Trump on Wednesday afternoon laid out his plan to impose import taxes on trading partners, including hefty tariffs on those that import the most medicines to the US. The administration will impose 20% tariffs on the European Union, 26% on goods from India, and 34% on China.

Of course, clarity on tariffs has been lacking and it wouldn’t be surprising in the least for the administration to change course on any part of its tariff regime at any minute. Remember, it has made last-minute changes to threatened tariffs several times since Trump took office. And Trump has also said before Wednesday that pharmaceutical tariffs would happen “soon.” 

In the executive order, the White House mentions the “need to maintain a resilient domestic manufacturing capacity is particularly acute in advanced sectors,” including pharmaceuticals, but it didn’t provide information about how it might reshore more pharma production to the US.

Pharmaceutical products are normally excluded from tariffs under a World Trade Organization agreement that the US signed in 1994. But as Trump seeks to put pressure on Europe and bring more manufacturing to US soil, the pharmaceutical industry has found itself a prime target of protectionist rhetoric. 

Ireland, which has attracted manufacturing because of its low corporate tax rate, is particularly vulnerable: in 2024, it exported more than $50 billion of pharmaceuticals to the US. “All of a sudden Ireland has our pharmaceutical companies. This beautiful island of 5 million people has got the entire US pharmaceutical industry in its grasp,” Trump said last month. 

Drugs imported from Ireland include Keytruda, a blockbuster cancer drug made by Merck, and Eli Lilly’s popular weight-loss and diabetes drugs, Zepbound and Mounjaro. Novo Nordisk’s GLP-1 drugs, Ozempic and Wegovy, are produced in Denmark.

While they make up a higher share of US pharmaceutical imports in dollar value, European companies that make brand-name drugs would have several levers to pull to respond to tariffs, said Diederik Stadig, an economist at European bank ING. That is because they have higher margins and are in a better position to increase capital expenditures in the US, as some already have.

“If the economic incentives for them change, over time, for a longer period of time, it makes sense to adapt that supply chain,” Stadig said. “You could never replace that overnight, but if they’re here and here to stay, it makes sense to move some of your branded production to the US if those products are going to the US regardless.”

Tariffs would have the biggest impact on the price of generic medications, which are predominantly produced in Asia, because the companies that produce those drugs operate on thinner margins, rely on cheap labor, and are less likely to move their operations. According to the Food and Drug Administration, 90% of prescriptions Americans fill are generic drugs.

Vinita Gupta, CEO of Mumbai-based generic drug maker Lupin, told analysts on February 13 that the company would raise prices on critical medicines if tariffs were implemented. Lupin makes cardiovascular, tuberculosis, and diabetes treatments.

“As an industry, we have all aligned on the fact that the industry has gone through a lot of pressures and critical medicines — high-volume, low-price medicines — cannot bear additional costs,” Gupta said.