Will Trump hit foreign pharma companies with tariffs?

Well, the last fortnight’s certainly been a rollercoaster.

Ever since President Trump announced his plans for sweeping tariffs on foreign goods entering the US on Thursday April 3, markets have hardly been able to catch their collective breath.

First there was the initial shock, at which point stocks tanked, before lurching up and down, and right and left, as they tried to gauge the extent of the potential damage – and then react to the latest pronouncements, delays, and possible u-turns emanating from the White House.

The latest worry is a big one for European pharma companies in particular – and by extension biotechs that are part of the same investment ecosystem. Will Trump go through with his threat to impose swingeing tariffs on imports of pharmaceuticals and drug ingredients into the US? Pharmaceuticals are currently exempt from tariffs thanks to a 1994 World Trade Organization deal.

British government officials were said to be scrambling to convince the Trump administration to shelve its plan, for UK-based firms like AstraZeneca and GSK at least, after Trump suggested he would implement a 25% tariff on foreign drugs in the “not too distant future”.

Pharma is deploying its big guns, both behind the scenes and now in public, to avert what would be a major threat to an industry that makes the lion’s share of its profits from US sales.

Joaquin Duato, the CEO of (American headquartered) Johnson & Johnson, is reported by the FT to have told analysts on a call on Tuesday: “There’s a reason why pharmaceutical tariffs are zero. It’s because tariffs can create disruption in the supply chain, leading to shortages.”

Pharma firms have generally held back from commenting publicly, preferring to avoid riling Team Trump and work in a more diplomatic manner. So Duato’s public intervention is significant – although it is telling he made it in a call to analysts, rather than in a more full-frontal manner.

However, his warning follows public comments made last Friday by AstraZeneca’s chair Michel Demaré, who said tariffs on pharmaceuticals could harm patients and “restrict health equity”.

Will their efforts cause President Trump to think again though? He has long questioned why the US pays more for the same medicines than most European countries do – although the reasons for that are complex. For instance, the UK’s NHS can drive a hard bargain thanks to its position as a centralised health system which is essentially buying meds for almost 70 million people. No US healthcare provider has that sort of buying power.

More recently, Trump has sought to grind the national security axe on the issue, arguing the fact that “we don’t make our own drugs anymore” could leave the US population exposed in a war or pandemic. He added: “All I have to do is impose a tariff. The more, the faster they move here.”

On Monday (April 14) Swiss pharma Novartis announced it was doing just that, revealing plans to invest $23 billion in new manufacturing and R&D facilities in the US over the next five years. It said in a statement: “With new manufacturing capacity, Novartis will be able to produce 100% of its key medicines end-to-end in the US.”

However, as many drugs are assembled from active pharmaceutical ingredients (“APIs”) sourced from across the globe, most companies won’t find it easy to avoid tariffs.

As ever with President Trump, it’s a guessing game. But right now it’s an uncomfortable ride.