On Thursday, former President Donald Trump made good on his recent threats with an explosive announcement. Beginning October 1, the United States will slap a 100% tariff on every branded and patented drug that is imported into the country. This great step has the potential to incentivize more domestic productions and reduce our dependency on drugs made overseas. Based on his announcement, Trump’s tariffs will start at a relatively low level and rise to impressive heights in the coming months.
The first 100% tariff will apply to all branded and patented pharmaceutical products. This action mainly aims at pricking the conscience of firms that don’t manufacture these pharmaceuticals in the U.S. To assuage fears, Trump was explicit that pharmaceutical companies who set up drug manufacturing facilities in the United States will be excluded from these tariffs. This exemption prevents the unintended consequence of limiting opportunities for investment in domestic production facilities, which would be a direct win for the U.S. economy and American job growth.
As a smart political move, Trump described a multi-staged process for the increases in the tariffs. He starts by raising his own tariff rate to a full 100% tariff. After one year to one-and-a-half years, he hopes to have that increased to 150%. Even so, he intends to crank it up further still to an extraordinary 250%. That would be the highest tariff he has floated so far.
“There will, therefore, be no Tariff on these Pharmaceutical Products if construction has started.” – Donald Trump
These intended tariffs are part of a larger effort to address long-standing concerns about drug pricing and market access in the United States. Trump imposes punitive tariffs on the drug imports to intimidate the pharma firms to repatriate their manufacturing to America. This shift will help lower costs for consumers and ensure national security in the drug supply.
Back in August, Trump came on CNBC’s “Squawk Box” and defended these tariffs. He hinted at his willingness to use trade policy to create jobs and economy benefits at home. Thursday’s announcement represents the most significant, next step in his larger strategy to drastically change the landscape of the controversial pharmaceutical industry.
As firms respond to these imminent tariffs, public policy professionals are assessing the likely consequences this will have on pharmaceutical prices and commonly prescribed medicines’ access. Meanwhile, the pharmaceutical industry has sounded the most pronounced alarms about the effects of these enormous tariffs. Some industries have expressed concern that these tariffs would increase costs to consumers, as companies may choose to pass on the increased costs.