The Supreme Court takedown of Trump administration tariffs in February was a short-lived victory for the industry. Now, the president has found a way to come after pharma again.
Some patented drugs and active ingredients will be hit with a 100% tariff in 120 to 180 days, unless companies can carve out a deal with the administration, the White House announced on Thursday.
This time, the tariff policy is built on far more solid legal ground, making it less likely to be overturned by the courts. It also fits into an ongoing American manufacturing strategy the Trump administration has been pushing in pharma.
“The proclamation aligns clearly with the administration’s emphasis on reshoring and strengthening critical supply chains, including those related to pharmaceuticals,” said Blake Harden, executive director and senior chief trade policy advisor in EY’s Washington Council, in an email. “Undoubtedly, this measure is expected to have far-reaching implications for branded pharmaceuticals and their pharmaceutical ingredients.”
The Trump administration’s February tariffs were enacted using the 1977 International Emergency Economic Powers Act, an approach questioned by many industry experts and ultimately repudiated by the courts. The new round is being levied under Section 232 of the Trade Expansion Act of 1962, a pathway that allows the president to impose tariffs on specified imports if the U.S. Department of Commerce determines that they pose a threat to national security.
“The administration’s move to bring pharmaceuticals under Section 232 tariffs is a pretty dramatic escalation, and it signals that ‘national security’ is now being interpreted to include supply chain resilience for critical medicines,” Mento said. “That’s not entirely surprising, but applying it directly to pharma is new territory. At a high level, this isn’t just about tariffs. It’s about control of the supply chain. The U.S. is effectively saying it’s no longer comfortable being dependent on foreign production for key pharmaceutical inputs.”
The new tariffs come with exceptions for generics and biosimilars. And companies like Pfizer and AstraZeneca, which have negotiated pricing deals and onshoring agreements with the administration, may not have to pay any tariffs until 2029. Onshoring-only deals will receive a 20% tariff under the plan.
The prospect of avoiding tariffs may bring more companies to the negotiating table. So far, the U.S. has made deals with 17 drugmakers, according to Reuters.
A shaky tariff landscape
The latest tariff announcement is hitting the industry as it contends with reverberations from the now invalidated IEEPA round. A day before the proclamation came down, Mento described the landscape surrounding tariff policy as one of “utter chaos.”
“A friend of mine said it's like living up in Yellowstone, and one day a bear comes in and just wrecks your house,” Mento said. “That bear can come back whenever it wants.”
Compounding that chaos is the question of an estimated $166 billion in potential tariff refunds. Companies are slated to get money back but the refund process is still in question. And many drug companies may opt not to file claims, due to a lack of internal expertise and compliance concerns, he said.
History shows that 232 tariffs may be difficult to reverse. The Trump administration has already used this route to impose levies on other products, including steel and aluminum.
“I’ve never met a politician that didn’t love revenue,” Mento said. And tariffs provide it. President Biden had the opportunity to fully revoke 232 tariffs imposed during Trump’s first term, but opted not to.
But pharma is a very different environment.
“The industry has strong lobbying power, global interdependencies and patient cost sensitivities. So, while the policy may stick in some form, I would expect adjustments, exclusions and a lot of pressure to soften the edges,” Mento said in an email.
Pressures on the industry are stacking up.
“Many companies don’t have the ability to quickly shift production,” Mento said. “Building or qualifying new manufacturing — especially in the U.S. — can take years, not months. So in the short term, this likely means higher costs that will have to be absorbed somewhere in the system.”
Mento is also skeptical that the tariffs will lead to a longer-term acceleration of the push to diversify supply chains.
“[It may] not necessarily [lead to] full reshoring, but more ‘friend-shoring’ and regional redundancy,” he said. “Companies will start looking harder at where their APIs and intermediates are coming from, and whether they have too much exposure to any one country.”
This may mean revisiting sourcing contracts and pricing models, mapping supply chains in greater detail and evaluating whether there is sufficient cost justification to move production nearer or back to the U.S., he added.
“The real takeaway here is that this isn’t a short-term trade action — it’s part of a broader shift in how the U.S. thinks about economic security,” Mento said. “For pharma, that means the rules of the game are changing in a way that’s going to be felt for years, not quarters.”
