Donald Trump isn’t the first protectionist politician to go after foreign cars—a tariff just as an example. He further noted that pharmaceuticals are “not connected to this agreement at all.” With this arms race, the administration’s new proposal has raised concerns from drug makers themselves. In the meantime, European leaders are hungry for greater detail and what it portends for their sector. In recent weeks, Trump has suggested that an announcement is coming regarding tariffs on pharmaceutical imports into the United States. These tariffs might even reach a staggering 200%!
European Commission President Ursula von der Leyen remarked that decisions on how to address pharmaceuticals globally are documented on “a different sheet of paper.” This is an important story for what it reveals about the confusion reigning around our current trade truce. It still requires a 15% tariff on EU goods coming into the U.S., but is vague about terms concerning pharmaceuticals. As far back as 2019, analysts from Rabobank were sounding the alarm. They argue that ongoing fissures on sectoral tariffs—especially those affecting pharmaceuticals—would be catastrophic for the European economy.
The estimated effect of even a modest 15% tariff on pharmaceutical products would be detrimental not only to European firms but to the overall economic environment. The Trump administration has initiated a Section 232 investigation to assess the potential impact of pharmaceutical imports on national security, with results expected by August. With this investigation, USITC has an important opportunity to greatly influence the future course of tariff policy.
In a recent statement, Philips CEO Roy Jakobs articulated the need for this change. He added that his company has applied for tariff exemptions in the U.S., EU, and China. He urged the inclusion of discussions to permanent tariff exemptions. Further, he continued, “we’ve been asking for tariffs exemptions in U.S., EU, and China. That’s something we have been pleading for.”
Eurasia Group analysts caution that unexpected increases to the proposed 15% ceiling on pharmaceutical tariffs could jeopardize the fragile trade truce. As the Trump administration considers what to do next with regard to importing pharmaceuticals, industry players can only sit and wait with bated breath to see what happens.