Trump's proposed pharma tariffs to boost US manufacturing face skepticism due to potential disruptions

From Yahoo Finance: 2025-05-21 11:28:00

President Trump’s proposal of import tariffs on pharmaceuticals to boost US manufacturing could impact biotech while spurring reconsideration of biopharma production. The US imported $213 billion in pharmaceuticals in 2024, with India and China as major suppliers. Experts warn that tariffs may disrupt the industry and hit biotech the hardest.

Experts caution that while tariffs may encourage nearshored manufacturing, the costs of relocation for drug companies outweigh the benefits. Trump’s proposed tariffs are seen as a shortcut policy that may not address the real issue of establishing US-based pharma manufacturing. Long-term relocation to low-tariff countries is predicted, potentially leading to supply disruptions and drug shortages.

Pharma companies are showing signs of preparing to nearshore operations in the US, with significant investments announced by companies like Eli Lilly, Novartis, and Sanofi. However, experts believe that these commitments may be politically motivated and could be reversed if tariffs are dropped. The unpredictable stance of the administration is causing hesitation in committing fully to nearshoring production.

The Biden administration had already been pushing for more nearshoring of manufacturing before Trump’s tariffs were proposed. This trend is seen globally, with countries like Europe and Canada also considering similar strategies. Despite the potential for tariffs to increase costs for manufacturers, the US remains a key market for pharmaceuticals due to its high demand and profitability.

While the US may struggle to compete in generics manufacturing against Asian countries, it is well-positioned for advanced therapies like biologics. However, tariffs on generics could lead to medicine shortages in the US, impacting patients who rely on these essential drugs. Smaller biotechs face existential threats from tariffs, potentially leading to a decline in innovation in the sector.

The uncertain environment created by Trump’s policy is dissuading investors from supporting emerging advanced therapies, which could lead to consolidation in the industry. Larger companies may take advantage of lower valuations to acquire innovative small players, strengthening their own pipelines at the expense of smaller biotechs. Despite the challenges, the US remains a valuable market for biotech innovation.

Biotechs may consider regionalized manufacturing as a workaround to tariffs, especially for time-sensitive therapies like cell and gene therapies. However, scaling up regional manufacturing presents logistical challenges and regulatory complexities that could limit the effectiveness of this approach. Pharma companies are exploring digital platforms for direct-to-consumer distribution to maintain control over their supply chains.



Read more at Yahoo Finance: Can pharma tariffs “Make America Manufacture Again”?