U.S. President Donald Trump authorized on Thursday the imposition of tariffs of up to 100% on certain imported pharmaceutical drugs, aiming to pressure drugmakers to shift more production to the United States. However, the new levy includes several significant exemptions that may diminish its actual impact.
According to a White House statement, the new tariffs apply to patented drugs produced in countries that lack a trade agreement with the United States and for which the relevant companies have not signed a “most-favored-nation price agreement” with the government. For major economies that have already reached agreements with the White House, such as the European Union, South Korea, Japan, Switzerland, and Liechtenstein, the tariff ceiling on imported drugs will be set at 15%. The United Kingdom, having secured a separate agreement on Thursday committing to double the government’s share of GDP spent on new drugs over the next decade, will face lower tariffs on its drug imports.
The effective dates of the tariffs vary by company size: tariffs on products from large companies will take effect within 120 days, while those on products from smaller manufacturers will not be imposed until after 180 days. If a company commits to partial production in the United States, its import tariff rate will be 20%; if it reaches a most-favored-nation agreement, the rate drops to zero. This exemption policy will remain in effect until January 20, 2029.
Most of the world’s top drugmakers, including Eli Lilly, have avoided punitive measures by reaching agreements with the government. This means the new tariffs will primarily impact smaller pharmaceutical companies and manufacturers of active pharmaceutical ingredients. Veda Partners analyst Spencer Perlman estimates that of the total $274 billion in pharmaceutical imports in 2025, only about $12 billion worth of goods will be subject to the full 100% tariff. Generic drugs are not affected by the new tariffs, and specialty pharmaceutical products (such as drugs for rare diseases or animal health products) will also be exempt if they come from countries with trade agreements or are needed to meet urgent public health needs.
Industry groups have voiced strong criticism. John Crowley, CEO of the biotechnology industry lobbying group BIO, said that imposing any tariffs on U.S. drugs would drive up costs, hinder domestic manufacturing, and delay the development of new therapies. He added that the tariffs would create financial risks for smaller biotech companies, which often lack the capital to build dedicated manufacturing facilities. Stephen Ubl, president of the Pharmaceutical Research and Manufacturers of America (PhRMA), warned that the tariffs would increase costs and could jeopardize billions of dollars in U.S. investments announced last year.
White House officials stated that GlaxoSmithKline (GSK) could see its tariff rate reduced to zero if it finalizes a domestic manufacturing agreement with the U.S. government. It remains unclear when and to what extent U.S. patients will feel the impact of the tariffs. Americans already pay the highest drug prices in the world, and drug pricing involves complex negotiations among insurers, pharmacy benefit managers, and manufacturers, making it difficult to immediately pass on increased costs. However, consumers may ultimately face higher prices through increased deductibles or higher insurance premiums.
