Trump Targets Overseas with 100%-Tariff

Tariffs on medicines are unprecedented, as it has long been a consensus that patient care takes precedence over economic interests. This principle was cast aside by US President Donald Trump yesterday night. Patented medicines not manufactured in the US, or whose producers do not invest in the US, will be subject to a 100% import tariff from 1 October, forcing manufacturers to establish production facilities in the US.

The withdrawal of investment from other regions is clearly illustrated by the example of the UK. In September, companies including Merck & Co, Eli Lilly & Company, AstraZeneca and Sanofi withdrew investment commitments totalling US$2bn, after negotiations over higher medicine prices failed or due to dissatisfaction with governmental support for implementation. With Trump’s announcement, the preferred Partnership in Life Sciences agreed with the UK government in May is likely to be severely undermined.

Trump’s trade-war declaration has left Europe paralysed but also ready to respond: the spokesperson for the European Commission’s Trade Commissioner stated, “The clear, flat 15%-tariff ceiling for EU exports represents an insurance policy that no higher tariffs will be imposed on European economic operators.” The Swiss industry association scienceindustries privately referred to the measure as a price hammer.

By contrast, the president of Germany’s powerful pharmaceutical association vfa struck a different tone: “The announced 100% import tariffs would have severe effects on international supply chains, increase the cost of medicine production and endanger patient care – both in the US and Europe. We are already seeing investment at the site being frozen. This is the last thing Germany’s economic location needs now,” said vfa president Han Steutel. Around 25% of German pharmaceutical exports go to the US, amounting to approximately €27 Mrd in 2024. In earlier statements, Steutel emphasised that the EU pharmaceutical market far exceeds the size of the US market. It is now necessary to overcome fragmentation and present a united front to the US through a single EU internal market.

Nathalie Moll, Director of the European Federation of Pharmaceutical Industries and Associations (EFPIA), echoed this position, noting urgent need for discussions: “The EU and the US already have a trade agreement; urgent talks are needed on how to avoid tariffs on medicines that would harm patients in the EU and the US.”

Ireland’s Deputy Prime Minister Simon Harris stated that the impact of the announcement would be “assessed”, but stressed that the joint statement of 21 August on the EU-US tariff agreement “made absolutely clear that any new tariffs announced by the US under its Section-232 investigation on pharmaceuticals would be capped at 15% for products exported by the EU.”

A spokeswoman of the German biotechnology association BIO Deutschland stated: The US is an important market for German biotech companies. Tariffs of 100% therefore pose a major challenge for biotechnology companies. This is particularly true when one considers that the US government also wants to significantly reduce the prices of innovative biopharmaceuticals. Sub-products for production come from all over the world, and a trade policy with high customs duties jeopardizes supply chains and thus reliable and affordable patient care. For some companies, relocating production to the US may be an option. For most companies in the industry, however, especially small and medium-sized enterprises, this is not something that can be implemented quickly, if at all. Europe should now do everything in its power to strengthen Europe as a location for biotechnology.”

The new tariff threat comes just days after the US also opened a Section-232 investigation into diagnostics and medical technology.

The Chinese government has been surprisingly restrained, as China sells only a very small proportion of patented medicines in the US (4%), but is critical for the supply of APIs and generics, which account for almost 90% of US prescriptions. The Chinese Ministry of Commerce urged companies not to engage in a price war.

According to Jeremy Levin, one of the most influential biotech CEOs in the US, corporate surveys indicate that 90% of US biopharma companies rely on at least one Chinese contract manufacturer or supplier. The US Federal Reserve has warned of increased inflation risks due to the pharma tariffs.