The U.S. will start imposing a 100% tariff on all branded or patented pharmaceutical products as of Oct. 1, unless the manufacturer is building a production facility in the U.S., according to a Sept. 25 Truth Social post from President Donald Trump.
“‘IS BUILDING’ will be defined as, ‘breaking ground’ and/or ‘under construction,'” the president wrote in the post. “There will, therefore, be no Tariff on these Pharmaceutical Products if construction has started.”
Here are six things to know:
- Any of the new tariffs stemming from sector-specific investigations will be added on top of President Trump’s country-specific levies, though trade agreements made with the European Union and Japan may exempt them from additional duties, CNBC reported Sept. 25. On July 27, the U.S. and E.U. reached a deal to set tariffs at 15%, a reduction from the 30% previously threatened July 12.
As part of the agreement, both agreed to apply zero tariffs on generic pharmaceuticals and semiconductors. Additionally, the U.S. reached a trade deal with Japan, setting a 15% tariff on imports, lower than a 25% levy previously threatened. - Previously, President Trump has said levies on drug manufacturers would prompt them to move production to the U.S. In recent months, drugmakers Eli Lilly, Johnson & Johnson and AbbVie have started to announce multi-billion dollar investments to bring more production to the U.S.
- Drugmakers have warned levies could increase costs and deter investments in U.S. manufacturing. In public comments to the government in May, Eli Lilly said levies on pharmaceuticals would “deprive manufacturers of essential capital to both innovate and invest in reshoring.”
- The move comes after President Trump launched a Section 232 investigation in April into pharmaceutical products, which allows the commerce secretary to investigate the effect imports have on national security. On Sept. 24, the Commerce Department also launched a Section 232 investigation into imports of personal protective equipment, medical consumables and medical devices such as surgical masks, gloves, ventilators and imaging machines.
- Prior to the Sept. 25 tariff announcement, President Trump had signaled plans for tariff action on pharmaceuticals. In an Aug. 4 interview with CNBC, he said the U.S. could impose pharmaceutical tariffs as high as 250%, the steepest proposed to date, as part of a phased effort to bring more domestic drug manufacturing to the U.S. In the interview, he outlined a plan to start with a lower levy, increasing it to 150% within a year and potentially reaching 250% after 18 months.
The comments followed an executive order signed July 31 that set new tariff rates between 10% and 41% on imports from more than 60 countries, effective Aug. 8. At the same time, President Trump sent letters to 17 major drugmakers urging them to align U.S. medication prices with the lowest prices sold in other countries. He also called on them to expand access to their full product lines for Medicaid patients. - Most recently, President Trump signed an executive order Sept. 8 modifying the tariff scope for certain imports including pharmaceuticals. The order exempted drugs currently under Section 232 investigation from additional tariffs and outlined potential tariff reductions for specific generic drugs and their ingredients. However, the reductions are contingent on foreign partners making broader trade agreements with the U.S.
