The Trump administration is threatening to impose large tariffs on drugs imported into the United States, although they wouldn’t take effect for at least a year.
“If they have to bring the pharmaceuticals into the country, the drugs and other things into the country, they’re going to be tariffed at a very, very high rate, like 200%,” Trump told reporters following a Tuesday Cabinet meeting.
However, any tariffs would not take effect this year. “We’re going to give people about a year, year and a half, to come in, and after that, they’re going to be tariffed,” he said. “We’ll give them a certain period of time to get their act together.”
Commerce Secretary Howard Lutnick, speaking on CNBC after the meeting, said more details may be forthcoming after research into the impact of potential tariffs is completed. “With pharmaceuticals and semiconductors, those studies are being completed at the end of the month, and so the president will set his policies then, and I’m going to let him wait to decide how he’s going to do it,” he said.
The news comes as the administration is pushing for pharmaceutical manufacturers reshore drug production in the United States. The Hill reported that drug companies believe tariffs would disrupt international supply chains, forcing companies to decide whether to pass on increased costs to patients and exacerbate current drug shortages.
Trump has long criticized foreign production of medicine as a threat to national security and floated the possibility of tariffs to encourage drugmakers to manufacture domestically, according to Bloomberg. Several manufacturers have responded by announcing multibillion-dollar manufacturing investments in the United States.
Any tariffs that are imposed are expected to have an outsized effect on Ireland, whose $54 billion trade surplus with the United States caught Trump’s attention, Bloomberg reported. This imbalance, driven in large part by pharmaceuticals, results from the country’s favorable tax regime and educated workforce. U.S. drug companies, including Lilly and Pfizer, operate nearly two dozen factories in Ireland that ship to the Unted States, according to a TD Cowen analysis.
In April, the administration initiated a Section 232 investigation into the effect of drug imports on national security. This investigation “includes both finished generic and non-generic drug products; medical countermeasures; critical inputs, such as active pharmaceutical ingredients and key starting materials; and derivative products of those items.”
The scope of the investigation includes current and projected demand for pharmaceuticals and pharmaceutical ingredients in the United States; the role of foreign supply chains, particularly of major exporters, in meeting U.S. demand for pharmaceuticals; the concentration of imports from a small number of suppliers and any associated risks; and the feasibility of increasing domestic capacity for pharmaceuticals and ingredients.