Trump issues ultimatum to pharma, new tariffs on foreign drugs coming

The Trump administration is officially imposing tariffs of up to 100% on certain foreign-made drugs. The decision applies to patented drugs from countries that do not have special trade agreements with the United States.

Large corporations have 120 days to prepare for the new rules. Small businesses have been given a little more time, 180 days. For strategic partners, including the EU, Japan, and Switzerland, the rate has been capped at 15%.

This move is part of Trump’s America First strategy, the agency reports. Most market leaders have already reached an agreement with Trump. Merck & Co. and Eli Lilly & Co. have effectively avoided the punitive measures. They agreed to the White House’s terms in exchange for their previous benefits.

The administration’s demands on the companies were as follows:

• A significant reduction in prices under the Medicaid program
• Direct sales of drugs to American consumers
• The launch of new drugs in the US at prices no higher than in other developed countries.

If a manufacturer commits to producing part of its output in the US, the tariff rate will drop to 20%. And if a special Most-Favored-Nation agreement is signed, the tariff could be reduced to zero by January 20, 2029.

What’s wrong with Trump’s drug tariffs

Despite what appears to be support for domestic manufacturers and job creation, industry groups are already sounding the alarm. Bloomberg emphasizes that the industry fears shortages and the disruption of supply chains. Americans already pay the most for healthcare in the world. The new tariffs risk making treatment unaffordable for millions.

There may not be an immediate spike in prices, but experts are certain: patients will feel the effects later on. This could manifest itself in the form of higher copayments or more expensive insurance policies. Generic drugs (cheaper copies) have not yet been affected. But the Department of Commerce will review them within the year. Most likely, tariffs are on the horizon for them as well.

Pharmaceutical companies will have to choose: either build factories in the US or raise prices for the end consumer.

Background

Back in February, Donald Trump signed an executive order imposing 10% tariffs on goods from any country in the world. Exemptions were granted for aerospace products, passenger cars, and certain trucks, as well as goods from Mexico and Canada.

The Supreme Court ruled Trump’s tariffs illegal, but the Administration immediately launched a global investigation against China, the EU, and a dozen other countries. This allowed them to circumvent the Supreme Court’s decision and reinstate the import tariffs.

The governor of California sharply criticized Trump for his tariff policy. The official called the US President a fraud and noted that the tariffs personally benefit Trump.