Donald Trump announced major new tariffs on imports of drugs and commercial trucks at a press conference on Wednesday. The plan is for both tariffs to go into effect on October 1st. The administration plans to impose a 100% tariff on pharmaceutical imports unless companies commit to building manufacturing plants in the United States. On top of all that, a 25% tariff will soon be applied to heavy trucks coming into the U.S. market.
One of the stated goals of the new tariff policy is to encourage domestic production and lessen dependence on foreign imports. Manufacturing companies that begin the process of building new manufacturing facilities in the U.S. will be exempted from the tariff. This benefit only starts counting once they actually sign contracts to break ground on their projects. Trump’s previous threats included tariffs as high as 200% on pharmaceutical imports, indicating a significant shift in trade policy under his administration.
The Trump administration recently initiated a national security investigation into the imports of medical devices. This grave decision would open the floodgates to tariffs for the entire industry. This move is intended to bolster domestic manufacturing. Beyond the more-than-expected increases in spending, it uniquely addresses national security worries related to pharmaceutical and other healthcare supply chains.
European stocks plunged after the announcement of a national security probe into the merger. This drop underscores investor concerns about the macroeconomic impacts that these tariffs may have across various industries. In Asia, pharmaceutical stocks took steep losses as investors sold off Asian stocks in reaction to the soon-to-be-imposed U.S. Shares traded on the continent in Europe appear set to open in positive territory this morning. Well, we’ve got market participants actively assessing the implications of all the latest trade policy surprises raining down from Washington.
JP Morgan strategists weighed in on the situation, noting that the potential 100% tariff on pharmaceuticals should largely be avoidable with U.S.-based manufacturing buildout. Just as critically, they recognized the prevailing confusion about the announcements. Yet they think the cumulative effect of tariffs on large-cap exclusion appears to be more than manageable.
“And while there remain a number of unknowns on tonight’s announcement … we continue to see a very manageable overall impact from tariffs to our large cap coverage.” – JP Morgan strategists
As the U.S. prepares for a new era of trade policy, enterprises in industries touched by increased trade enforcement, monitoring, and compliance need to move fast. As the administration’s priorities towards building domestic production capacity become clearer, the playing field for importers and manufacturers may be significantly changed.