Trump's new pharmaceutical policy takes effect: imposing 100% tariffs on some imported drugs, potentially increasing supply chain risks

Zhitoong Caijing app notices that the Trump administration will impose tariffs of up to 100% on certain imported prescription drugs, despite several major exemptions. This move is intended to pressure pharmaceutical companies to produce more domestically in the United States.

The new tariff line items, authorized by U.S. President Trump on Thursday, apply to patent drugs that are produced in countries that do not have a tariff agreement with the United States, and whose relevant manufacturing companies have not signed a “most-favored-nation (MFN) pricing agreement” with the government.

According to a White House statement, tariffs on products from certain large companies will take effect within 120 days, while products from smaller manufacturers will not be hit until 180 days later.

The statement says that for major economic entities that reach agreements with the White House, the tariff cap on their imported products will be set at 15%. This includes the European Union, South Korea, Japan, Switzerland, and Liechtenstein. Under a separate agreement reached on Thursday, the United Kingdom agreed to double the share of government spending on new drugs in GDP over the next decade, so imported pharmaceuticals from the UK will face a lower tax rate.

The White House said that if companies commit to producing some of their products in the United States, the tariff rate on their imports will be 20%; while if they reach an MFN agreement, the rate will drop to zero. This tax-free exemption will last until January 20, 2029.

These charges carry out a threat issued by the president last autumn: that unless companies shift production to the United States, they will face 100% tariffs on branded or patented drugs. But these measures also include significant exclusion clauses, which could weaken their impact.

Most of the world’s top pharmaceutical companies, including Eli Lilly, have avoided punitive measures by reaching agreements with the government. Last summer, Trump sent letters to 17 companies and laid out a series of demands, including lowering the fees charged for Medicaid for people receiving benefits targeted at low-income populations, selling directly to U.S. consumers, and ensuring that the launch prices of new drugs in the United States match those in other developed countries, in exchange for tariff relief.

This means the new tariffs will mainly hit smaller pharmaceutical companies and active pharmaceutical ingredient (API) manufacturers. Veda Partners analyst Spencer Perlman estimates that out of $274 billion in pharmaceutical imports in 2025 in total, only about $12 billion worth of goods will be affected by 100% full tariffs.

Industry groups representing biotechnology companies criticized the move. In a statement, BIO’s chief executive officer John Crawley said: “Any tariffs on U.S. drugs will raise costs, hinder domestic manufacturing, and delay the development of new therapies—none of which will help strengthen our national security.”

Crawley said the tariffs would create financial risks for smaller biotech firms, because these companies typically lack the capital to build dedicated manufacturing facilities.

A White House official said that the UK’s current tariff rate is 10%, but if GlaxoSmithKline (GSK.US) reaches a domestic manufacturing agreement with the U.S. government, the rate would drop to zero.

Overseas production

Generic drugs will also not be affected by the new tariffs, but ahead of the announcement, White House officials said that the measures signed by Trump instruct the Department of Commerce to re-evaluate these products within a year, leaving room to impose tariffs in the future depending on how much production shifts back. In addition, specialty pharmaceutical products (such as drugs for rare diseases or animal health drugs) will also receive exemptions if they come from countries that have reached trade agreements, or to meet urgent public health needs.

These new tariffs were launched as part of an investigation started in April 2025 under Section 232 of the Trade Expansion Act. The provision allows the president to impose tariffs unilaterally on imported products deemed to threaten national security. Industry groups say they are concerned this could seriously disrupt supply chains, worsen shortages, and raise costs for Americans.

This is Trump’s latest protectionist move. His trade agenda was dealt a setback in February, when the Supreme Court ruled that his global tariffs violate the U.S. Constitution. But tariffs imposed under Section 232 on other industries were not affected by that ruling. On Thursday, Trump also took action to simplify and tighten metal tariffs.

Trump has long criticized overseas pharmaceutical production as a threat to national security, and previously floated the idea of imposing tariffs as high as 200% to encourage domestic manufacturing. Afterwards, companies issued a series of announcements about investing billions of dollars in the United States, but this was not enough to prevent tariff measures arising from the Commerce Department investigation.

Pharmaceutical companies will face a choice: either absorb the tariff costs themselves, or raise drug prices in this global’s most expensive market. Stephen Ubbell, chairman and chief executive officer of the Pharmaceutical Research and Manufacturers of America (PhRMA), said tariffs “will increase costs and could jeopardize the billions of dollars in U.S. investment announced last year.” Interpharma, the Swiss pharmaceutical lobbying group, urged its government to negotiate an agreement similar to the one the UK reached.

It is still unclear when patients will feel the impact and how large it will be. Drug prices Americans pay are already the highest in the world. These prices are usually determined through a complex series of negotiations among insurers, pharmacy benefit managers (PBMs), and manufacturers, which makes it difficult to pass on the added costs immediately. But ultimately, consumers may face higher prices through rising deductibles or higher insurance premium policy costs.